Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKERin the Chair]

PRIVATE BUSINESS

KENT RIVER BOARD (HARBOUR OF RYE) BILL [Lords]

To be read a Second time Tomorrow.

PIER AND HARBOUR PROVISIONAL ORDER (LANGSTONE HARBOUR) BILL

Read the Third time and passed.

OFFENCES RELATING TO MOTOR VEHICLES

Address for Return,
showing the number of offences relating to motor vehicles in England and Wales, the number of persons prosecuted for such offences, statistics of the proceedings in magistrates' courts, and the number of alleged offences in respect of which written warnings were issued by the police, together with the number of persons concerned, during 1961."— [Mr. Renton.]

Oral Answers to Questions — TRADE AND COMMERCE

Northumberland

Mr. McKay: asked the President of the Board of Trade what is the area of the various sites for trade purposes in Northumberland; why business firms have not yet contracted for their use; and how many more trade sites are now being prepared.

The Parliamentary Secretary to the Board of Trade (Mr. Niall Macpherson): The area of the various sites designated for industrial development in Northumberland is given in the booklet produced by the Northumberland County Council, a copy of which was sent to the hon. Member on the occasion of his previous

Question on this subject on 5th June. A number of these sites are being used by business firms. The preparation of additional sites is a matter for the Northumberland County Council, but my right hon. Friend is satisfied that industrial development in Northumberland is not being held up through any shortage of suitable sites.

Mr. MacKay: Does the Minister realise that by this Question I am trying to give him an opportunity to advertise Northumberland? We hope that businessmen sometimes read HANSARD. We ask the Minister to do everything he can to advertise the position in Northumberland; that there are sites and any amount of people still out of work there, and we are anxious to have Northumberland developed.

Mr. Macpherson: I quite agree with the hon. Member that there are plenty of sites available in Northumberland, and we hope they will be developed.

General Agreement on Tariffs and Trade

Lady Tweedsmuir: asked the President of the Board of Trade on how many occasions he has applied for waivers under the General Agreement on Tariffs and Trade; and what were the considerations involved.

The Minister of State, Board of Trade (Sir Keith Joseph): On two matters we have applied for waivers which were granted subject to conditions. One waiver enables us to impose or increase a most-favoured-nation rate of duty without imposing a duty on imports from Commonwealth countries in cases where the latter have no substantial trade. The second waiver enables us in certain cases to accord increased preferences to imports from our dependent overseas territories.

Lady Tweedsmuir: As this procedure was introduced in order to enable this country and others to make special provision for industries which they felt were vital to their existence, could my hon. Friend say why he did not ask for a waiver under the G.A.T.T. to enable subsidies which are given in this country to boat owners to build their ships in British yards to continue as at present and ensure that these should not also apply to building in foreign yards?

Sir K. Joseph: I do not think that my hon. Friend is expressing quite correctly the reason for the system of waivers. The system of waivers is introduced, among other things, to allow countries to reconcile their G.A.T.T. obligations with pre-existing obligations, as we have, for instance, in connection with the Commonwealth. The waivers which we have asked for and obtained were in both cases because of our Commonwealth obligations. The fishing vessels grant has no such similar circumstances, and I doubt whether we should have obtained a waiver if we had tried.

Mr. Hector Hughes: Does the hon. Member realise that the machinery referred to in this Question provides him with a great opportunity to assist areas where the industry and employment are short? Will he say what practical steps he is taking to assist industry and employment in such areas, particularly in north-east Scotland?

Sir K. Joseph: I do not think the hon. and learned Member appreciates that we have ourselves invoked the G.A.T.T. principles which he is asking us now to reject. We have invoked them successfully for the benefit of our export trade. Of course, the G.A.T.T. reduces all over the world barriers to our exports on which the industries of this country depend.

Smokeless Fuels

Mr. John Hall: asked the President of the Board of Trade what complaints he has received that statements and advertisements issued by the producers of smokeless fuels about the quality of their products are misleading and inaccurate.

Mr. N.Macpherson: None, Sir, over the past three years, so far as I can trace.

Mr. Hall: Is my hon. Friend aware that a recent investigation by the Consumers' Advisory Council into the efficiency of smokeless fuels showed that the advertised claims within the specifications of producers such as the National Coal Board and others are grossly misleading and provide no guide at all to the consumer? Is he aware that it is claimed that the inadequacy of

many smokeless fuels may jeopardise the effectiveness of the Clean Air Act? In view of this, will he consider introducing standards which will provide some sort of protection for the consumer?

Mr. Macpherson: In reply to my hon. Friend's last question, we shall consider that, but this is primarily a matter for the British Standards Institution. In general, under the Merchandise Marks Act it is an offence to apply a false or misleading trade description. Where that is done prosecutions can be instigated by individuals or they can bring the matter to the Board of Trade and we can investigate it.

Mr. Allaun: Is the hon. Gentleman aware that the inquiry showed that in some cases up to a quarter of the material consisted of water and another 12 per cent. consisted of ash? Is he aware that in many areas the householder is having to pay so much for smokeless fuel that he is being forced either to use coal on the quiet and thus jeopardise the clean air scheme, or this winter to go without fires altogether?

Mr. Macpherson: I shall take note of what the hon. Member says; but there is a British standard which specifies the moisture content concerned.

Mr. Nabarro: Will my hon. Friend make perfectly clear that his answers to these questions relate only to solid smokeless fuels whereas the Question refers to smokeless fuels? Is it not a fact that there is no complaint whatever, voiced or otherwise, about gas, electricity or oil and that this complaint relates only to solid smokeless fuels?

Mr. Macpherson: I took my hon. Friend's Question to relate to solid smokeless fuels.

Coal Exports (Scandinavia)

Mr. Boyden: asked the President of the Board of Trade what arrangements he made with Poland during the recent commercial agreement to facilitate British coal exports to Scandinavian countries.

Sir K. Joseph: None, Sir.

Mr. Boyden: Is the Minister pleased with the progress of trade between Poland and Great Britain? Is it not


desirable to use our influence with Poland to prevent the dumping of Polish coal in Scandinavian countries so that British coal may compete fairly there?

Sir K. Joseph: The recent negotiations with Poland were concerned solely with Anglo-Polish trade.

Mr. Boyden: But there is a connection between our trade with Poland and our trade with Scandinavia and it is not just a matter of bilateral trade. Why will not the Minister use his influence in this way to improve our coal trade with Scandinavia?

Sir K. Joseph: It is not Governmental policy to seek to share out third markets during discussions of mutual trade.

Pit Closures

Mr. Boyden: asked the President of the Board of Trade what is the length of advance notice given to his Department of the closures of collieries.

Mr. N. Macpherson: From a few weeks to about a year, according to circumstances, from the time when it is definitely decided to close a pit.

Mr. Boyden: This is nothing like enough time to bring new industry to an area to replace employment lost by a closure. Will the hon. Gentleman look into the matter and see whether he can improve the notice he receives about this sort of thing?

Mr. Macpherson: My right hon. Friend is in very close touch with the Minister of Power, but there is a difficulty in that very often a final decision to close a pit is not reached until a relatively late stage. On the other hand, most of the areas in which there are pits threatened with closure lie in development districts so that there is no very great problem and we are not greatly handicapped by this at the moment.

Mr. Jay: Has there not been a longstanding arrangement for years between the Board of Trade and the Ministry of Fuel and Power, and now the Ministry of Power, that the Board of Trade had long notice of any closure? Is the hon. Gentleman telling us now that there may be cases where only a few weeks' notice is given to the Board of Trade?

Mr. Macpherson: We receive as long notice as possible. What I say is that in the nature of the case a final decision to close a pit is not necessarily taken with long notice. It may not be possible to give long notice. Circumstances may change for a variety of reasons and the notice may be quite short.

Mr. Jay: Are final decisions being taken almost on the spur of the moment, with no more than a few weeks' notice? If that is so, unemployment is inevitable.

Mr. Macpherson: This can work both ways. In some cases it is decided to keep a colliery open although previously it had been thought that it would close. This happened, for example, in relation to Roslin colliery in Midlothian quite recently.

Chadderton

Mr. Hale: asked the President of the Board of Trade what reply he has sent to the letter from the clerk to the Chadderton Urban District Council written on behalf of the council calling attention to the serious decline in output and employment in the cotton textile industry.

Mr. N. Macpherson: Representations in similar terms have been received from a large number of local authorities in the cotton belt. They have been advised that their representations have been taken into account during the Government's consideration of the issues involved.

Mr. Hale: Since this representation was made after Government consideration of the issues involved, how can it have been taken into account at that stage? Is the hon. Gentleman aware that very grave and heavy burdens are being put upon local councils by the closure of mills, by the loss of rateable value and by the increased need for social services, while, in the meantime, we are subjected to a peripatetic procession of Ministers deploring the devastation caused by their own policy? Will the hon. Gentleman bear in mind that the difference of view taken by his right hon. Friend and the Minister of Labour and the Lord Privy Seal about the importance of Commonwealth trade is causing considerable apprehension and prospects of distress?

Mr. Macpherson: I am not certain how that last question relates to the Question on the Order Paper.
The hon. Gentleman will be aware that in his constituency no great problem is arising because there are only 1· 5 per cent. of the total insured population unemployed at present and it cannot, therefore, be said that any very great burden is being placed on the local authorities in this regard. As regards Industrial Development Certificate policy, which is one of the matters raised by the council in question, we are, of course, prepared to steer industries to these areas provided that they cannot be steered to development districts.

Mr. S. Silverman: Can the hon. Gentleman explain where the Board of Trade obtains the figures which it constantly inflicts upon the House in regard to percentages of unemployment in the cotton belt? The figures quoted by the Board of Trade, repeated by the hon. Gentleman today, are very different from the official figures given to us by the Ministry of Labour in the constituencies. Are these figures being specially prepared or dealt with in some way so as to calm the fears of the House of Commons? Does not the hon. Gentleman know that in Nelson there is now 8 per cent. unemployment?

Mr. Macpherson: I think that the difficulty arises because the figures normally given by the Ministry of Labour include temporarily stopped.

Mr. Silverman: No.

Mr. Macpherson: Yes, they include temporarily stopped, whereas we deal with the figures of wholly unemployed, which are different. For example, I can tell the hon. Member for Oldham, West (Mr. Hale) that the percentage of wholly unemployed and temporarily stopped in his constituency was 2· 3 as against the 1· 5 per cent. which I gave earlier.

Mr. Silverman: Does not the hon. Gentleman realise that talking about temporarily stopped in that way conveys a false impression? Is it not true that the only difference between the permanently stopped and the temporarily stopped is the identity of the unemployed, and the percentage of temporarily stopped is as permanent as the percentage of the totally unemployed, so

that cutting down the figures by leaving the temporarily stopped out of account is very deceptive?

Mr. Macpherson: This is really a matter for my right hon. Friend the Minister of Labour. We are in touch with him. The fact is that the temporarily stopped are the temporarily stopped on a particular day and the number may be very much affected by, for instance, building labour unable to build on that day.

Pressed Steel Company

Sir J. Vaughan-Morgan: asked the President of the Board of Trade how many jobs will be provided as a result of the loan accorded to the Pressed Steel Company under the Local Employment Act; when these will become available; and where they will be.

Mr. N. Macpherson: My right hon. Friend is authorised by the company to say that it expects to provide over 5,000 new jobs as a result of the development for which the loan has been made. Some of these jobs have already been provided and the rest should arise over the next two or three years. They will all be at Linwood, Paisley.

Sir J. Vaughan-Morgan: That is very satisfactory as far as it goes, but can my hon. Friend explain why Parliament and the taxpayer have to derive their information about the nature of this transaction from an indiscreet statement in the chairman's annual report?

Mr. Macpherson: The statement was not indiscreet so far as the company was concerned. It would have been indiscreet if we had made it. We deal with the company on a confidential basis, but it is perfectly open to the company to disclose what goes on. It would not be open to us.

Scottish Board for Industry

Mr. Hector Hughes: asked the President of the Board of Trade if he has received the six-point plan sent to him by the Scottish Board for Industry last week recommending the building in Scotland of advance factories, more generous grants and other steps designed to alleviate unemployment in Scotland; and if he will state his reply to each of these recommendations.

Mr. Willis: asked the President of the Board of Trade what new proposals he has for providing employment in Scotland arising from the representations of the Scottish Board for Industry.

Mr. N. Macpherson: I had a full and useful discussion with the Scottish Board for Industry after receiving their views on employment in Scotland. Some of their suggestions were referred to in the debate on 26th June, and there will be a further opportunity to discuss them in the debate on industry and employment in Scotland. In general, I told the Scottish Board that the Government's policy is to continue to use to the full the powers available under the Local Employment Act to help those parts of Scotland in which high unemployment exists or is threatened.

Mr. Hughes: Does not the Minister realise that that reply is as vague as his replies generally are and that it bears no relation to the actual problem? Does he further realise that this is a plan evolved by expert industrialists and others which deserves the fullest consideration, not, as in the case of granting loans to foreign shipyards, where the experts were consulted after the Government had stated their policy instead of before it? Will the Minister take a lesson from that and pay heed to the good advice which the experts are giving him by this plan?

Mr. Macpherson: We always give heed to the advice of the advisory bodies which we ourselves set up, but we cannot follow it in every case. There were some seven separate suggestions put forward, and they are now being considered.

Mr. Willis: Is not the hon. Gentleman aware that almost every association and body in Scotland concerned with economic and social development is now very definitely of the opinion that the Government should take some fresh initiative about Scotland, and that that was pinpointed in West Lothian? Does not the hon. Gentleman think that it is about time that the Government adopted some of the very many suggestions which have been made by these bodies, and which are continuing to be made all the time?

Mr. Macpherson: We are aware that several areas consider that they should

receive special treatment, but our view is that we should give the same treatment to all areas that are in need.

Large Stores (Pilfering)

Mr. Awbery: asked the President of the Board of Trade if he is aware that the method of displaying goods for sale in many large stores constitutes a temptation to children and adults visiting them and is the cause of much pilfering; and if he will introduce legislation to ensure that such goods shall always be protected by glass screens.

Mr. N. Macpherson: My right hon. Friend has seen Press reports on this subject. He does not think that this is a suitable matter for legislation by his Department.

Mr. Awbery: Is the Minister aware that it is not only our duty to punish criminals, but also our duty to remove the temptation that causes the crime? Is he also aware that in my division a large number of young people have been prosecuted for pilfering, that these young people are not inherently criminals or thieves but that the temptation is put before them and they pick these things up almost unknowingly? Is he aware that a lady wrote to the Press last week complaining that she had picked up something inadvertently and returned it when she discovered it after leaving the stores? [HON. MEMBERS:" Speech."] Will the Minister have a look at the problem of the temptation to young people in these big stores?

Mr. Macpherson: This is not a new problem, and bookshops have displayed their goods openly for a very long time indeed, with a view to lowering the cost of distribution and of giving increased facilities for shopping. I do not think that we could interfere with this

Advance Factory, North Ayrshire

Sir F. Maclean: asked the President of the Board of Trade if he will cause an advance factory to he built in North Ayrshire.

Mr. N. Macpherson: As I told the House on 26th June, the Government are considering their future policy as regards


advance factories: the claims of North Ayrshire will be taken into account.

Sir F. Maclean: Is my hon. Friend aware that his right hon. Friend recently informed me that it was not even worth while for an American firm, which he knows, to visit North Ayrshire, because there were no existing premises there. and, in view of the serious unemployment prevailing in the area, will he not take steps to provide such premises at once?

Mr. Macpherson: With regard to the first part of my hon. and gallant Friend's question, my information is that the firm was not sure enough of being able to get the labour it needed in the area, after taking into account the prospective needs of other undertakings already established or under construction in the area. We are considering the policy as regards advance factories.

Sir F. Maclean: But is not my hon. Friend aware of the serious unemployment there, and also of the availability of a pool of skilled and semi-skilled labour in the area, because, if he is not. he ought to be?

Mr. Macpherson: I am also aware that there are more jobs in prospect than there are unemployed in the area. although I should admit that the jobs in prospect include overspill from Glasgow.

Mr. Emrys Hughes: Is not the hon. Gentleman aware that in his own constituency in Dumfriesshire the workers in a factory are working on a £ 600,000 trade contract with the Soviet Union? Is it not possible to get these factories extended, so that they can also help and be assisted by similar trade with the Soviet Union?

Mr. Macpherson: With regard to the first part of the hon. Gentleman's Question, I am aware of that, but I am not quite certain how it affects an advance factory in North Ayrshire.

Irish Yarn

Mr. McCann: asked the President of the Board of Trade, in view of the fact that Irish yarn is being sold in this country at 1s. 8d. per lb. less than its price in Eire, in contravention of the antidumping Acts, what action he proposes to take to see that this practice ceases.

Sir K. Joseph: The British Spinners' and Doublers' Association, in collaboration with the Cotton Board, has recently made representations to the Board of Trade about the import of cotton yarn from the Irish Republic at allegedly dumped prices. My right hon. Friend is considering these representations urgently.

Mr. McCann: Will the Minister see that these representations are made urgently, as the textile industry is in a parlous state, because of these backdoor methods? Even if the amount may be only small, even small amounts are vital to the future of Lancashire's industry.

Sir K. Joseph: I can certainly give the hon. Gentleman the assurance that we are considering this very urgently.

Factory, Stockton

Mr. W. T. Rodgers: asked the President of the Board of Trade whether the contract for the sale of the Government-owned factory formerly occupied by Metropolitan Vickers in Yarm Lane, Stockton, has yet been completed; and when he anticipates that production at the factory will be resumed.

Mr. N. Macpherson: We are negotiating for the sale of this factory to I.C.I., Ltd., but it will be for the company itself to issue any further information about its production plans when it is ready to do so.

Mr. Rodgers: Is the Parliamentary Secretary aware of the very real concern felt locally about the long delay in selling the factory and completing the contract, and can he give an assurance that when the factory is open it will provide as many jobs as it did at the beginning of 1960, when there were over 600 people employed there?

Mr. Macpherson: I am not certain of that, but I can say that it will ultimately provide more jobs than were provided by the previous occupants.

Balance of Payments

Mr. Nabarro: asked the President of the Board of Trade what increase in United Kingdom export trade, what diminution of United Kingdom imports,


and what measure of overall improvement in United Kingdom balance of payments occurred in the period 25th July, 1961, to 24th June, 1962, namely, the first 11 months of special terms and provisions of Government economic, financial and fiscal policy; and whether he will now make a statement as to United Kingdom exports prospects.

Sir K. Joseph: I am circulating tables in the OFFICIAL REPORT giving the latest published figures. Broadly, they show that there was little change in exports between the first and second halves of 1961 but that since the beginning of this year they have been rising; that imports declined between the two halves of 1961 but there has been some increase this year; and that there has been a marked improvement in the balance of payments since the middle of 1961. Provided world trading conditions do not deteriorate, my right hon. Friend expects exports to go on rising in the rest of this year.

Mr. Nabarro: Having regard to the fact that exports from the United Kingdom to the Common Market countries have increased in the last year by approximately 20 per cent., whereas the overall increase in United Kingdom exports is only marginal— some 3 or 4 per cent.— can my hon. Friend say where British exports have suffered their major decline and if that decline was manifest in the Commonwealth countries?

TABLE1


UNITED KINGDOM TRADE


(Seasonally adjusted monthly averages)


(£m)


—
January-June 1961
July-December 1962
January-May 1962
March-May1962


Imports
…
373
360
368
365


United Kingdom Exports
…
307
307
310
314


Re-exports
…
13
14
13
13


Total Exports
…
320
321
323
327

Sir K. Joseph: During the last half of last year the fairly steep rise in our exports to Europe, the Far East and other parts of the world tended to be offset, to some extent, by falls in our exports to parts of the Commonwealth and the primary producing countries, but since the beginning of this year many of the Commonwealth countries have been able to buy more from us. At the moment, the generally rising trend is offset principally in Canada and in India, where there have been falls in our exports, and, of course, present conditions in the United States must make us pause before predicting rising exports in that market at the moment.

Mr. Fell: Can my right hon. Friend say how much greater the rise in our exports to the Commonwealth would have been had we been spending the last two or three years in concentration on trying to get some financial policy for the Commonwealth, rather than messing about in Europe?

Sir K. Joseph: I think my hon. Friend fails to estimate or to value fully the really great efforts of our industries as a whole to export to the major trading markets of the world simultaneously. Very great efforts have been put into our trade with Europe and the Commonwealth, as well as into other markets.

Following is the information:

Hire Purchase Regulations (Mopeds)

Mr. Hocking: asked the President of the Board of Trade if he will give consideration to reclassifying, for the purpose of the Hire Purchase Regulations, the moped as a cycle.

Mr. N. Macpherson: The concessions made last month represent the limit to which my right hon. Friend is prepared to go at present, but he will watch the situation closely.

Mr. Hocking: In view of the fact that a moped is recognised as being an auxiliary bicycle, will not my hon. Friend have another look at this question and perhaps consult the industry and try to straighten out this anomaly?

Mr. Macpherson: When we looked at this, we decided that it was rather difficult to classify it as a self-propelled vehicle, but if the industry would like to see me at the Board of Trade, I shall be very pleased to see its representatives.

Poland (Minister's Visit)

Mr. Rankin: asked the President of the Board of Trade if he will make a statement on his visit to Poland.

Sir K. Joseph: My right hon. Friend visited Poland for a week from 11th June at the invitation of the Polish Government. During his visit he reviewed Anglo-Polish trade with Polish Ministers. He visited the Poznan Fair on 15th June, which was British Day, and inspected the stands of the fifty-one British exhibitors. He also saw something of modern Polish industrial plants.

Mr. Rankin: Could the hon. Gentleman possibly have told us less about this visit? Is he not aware that it was in order to sign a commercial agreement? Can he tell us something about the terms of that agreement? Was it a favourable one? Is it the case that we can welcome it because of the terms on which exports and imports between the two countries have been agreed upon? Can favourable trade agreements of this nature continue to be made if we enter the Common Market?

Sir K. Joseph: My right hon. Friend was present when the agreed minute was signed which allowed for increased trade

both ways between our two countries. My right hon. Friend was asked by Polish Ministers what the effect on our trade might be if we joined the Common Market. He was able to assure them that in the view of Her Majesty's Government our trade with all countries should generally tend to increase.

Mr. Bullard: Will my hon. Friend give an assurance that among the items talked about in these conversations was not the importation of increased quantities of Polish eggs?

Sir K. Joseph: The Polish industry has diversified itself a good deal over the past few years and I think that we can hope to trade on the basis of an increasing proportion of Polish industrial goods.

Mr. Rankin: As two of the major items were bacon and butter, can the hon. Gentleman assure us that we would be able still to import such large quantities of these commodities as are stated in the agreement if Denmark joined the Common Market with us?

Sir K. Joseph: No. The hon. Gentleman will realise that it is impossible to forecast exact items and quantities any distance ahead.

Sunderland

Mr. Willey: asked the President of the Board of Trade why the project in Sunderland, for which assistance had been approved in June, 1961, but which was in abeyance in March, 1962, is now still under consideration.

Mr. N. Macpherson: Because the company concerned substantially altered its plans.

Mr. Willey: The hon. Gentleman will realise that this is disappointing to us. Can he assure the House that every step will be taken to expedite the consideration of this and ensure that the project is started?

Mr. Macpherson: Yes. It is a matter for the company in the first place to formulate its plans.

Mr. Willey: asked the President of the Board of Trade how much land administered by the Industrial Estates


Management Corporation in Sunderland is available for further factory development.

Mr. N. Macpherson: The Board of Trade is holding between three and four acres of Government-owned industrial land against development by existing tenants in Sunderland.

Mr. Willey: Does the hon. Gentleman realise that one of the biggest handicaps we have in Sunderland is a shortage of attractive industrial estates? Will he therefore look at this with a view to reconsidering his decision not to put us on the list of development districts?

Mr. Macpherson: I do not think that this is a factor involved in our decision not to have Sunderland on the development district list.

Mr. Willey: Does the hon. Gentleman agree that there is a very real difficulty in providing attractive industrial estates without Government assistance?

Mr. Macpherson: No. Our experience is that many boroughs have been able to provide adequate industrial estates and are doing so all the time.

Tourist Trade (Sample Surveys)

Dame Irene Ward: asked the President of the Board of Trade how many staff are employed by his Department in the questioning of British travellers returning from Europe, details of which have been sent to him; what is the reason for their employment in this way; and what is the annual cost involved.

Sir K. Joseph: A voluntary sample survey of all passengers travelling to and from the United Kingdom has been introduced to improve the estimates of tourist receipts and expenditure to our international balance of payments, and to provide estimates of the total number of migrants by sea and air. A part-time staff of about a hundred interviewers is currently employed. The total cost of the survey is estimated at £ 80,000 a year.

Dame Irene Ward: Is my hon. Friend aware that this information is staggering? Why was not Parliament informed about this before? When shall we he able to have a little money for

something which would be more worth while? I could spend that £ 80,000 very easily on doing something very much more worth while.

Sir K. Joseph: Perhaps my hon. Friend does not appreciate that tourism is a very large getter and spender in our international accounts.

Dame Irene Ward: Yes, I do. I have masses of tourists.

Sir K. Joseph: Most countries want to inform themselves more about the actual cost and results of tourism, and many of them do it by much more expensive and much less effective ways than the sample interview. For all these purposes, and particularly so that we can learn more about the balancing item in our international accounts, this seems a very effective and economic way of vetting the information.

Empty Factories (Disposal)

Mr. Hannan: asked the President of the Board of Trade what legislative or other proposals he has for ensuring control of the disposal of empty factories.

Mr. N. Macpherson: My right hon. Friend has no powers to control the disposal of privately-owned factories. However, a register of available empty factories in development districts is kept at Board of Trade Headquarters and in the Board's Regional Offices, and this is shown to industrialists looking for industrial premises.

Mr. Hannan: Without such provisions. how does the Board of Trade propose to convince Parliament and the people of Scotland and elsewhere that it is serious in its intentions about the location of industry? Does it propose to continue the present practice that when factories are vacated in London and in the Midlands they are immediately filled up again, instead of the Board of Trade having control of the empty factories and in that way hoping to channel industry to places such as Scotland and the north-east of England?

Mr. Macpherson: I am not certain why the hon. Gentleman wants the Board of Trade to have control. If it is in order to change the use, that would involve a lower value for the factory


and would not be an encouragement to industries to move to development districts.

Industrial Development Certificates

Mr. Lawson: asked the President of the Board of Trade how many Industrial Development Certificates have been granted since the passing of the Local Employment Act in areas of full employment; and how many new jobs have been created.

Mr. N. Macpherson: We have no definition of areas of full employment, but from the passing of the Local Employment Act industrial development certificates issued in the Midlands and the London and South Eastern areas, excluding development districts, totalled 3,167, with an estimated employment of about 98,100.

Mr. Lawson: Does not this show that the present methods are inadequate to enable the Government to carry out their declared policy of bringing about a more adequate distribution of industry to areas of high unemployment? Will the hon. Gentleman ensure that measures such as that suggested by my hon. Friend the Member for Glasgow, Maryhill (Mr. Hannan) and others are put into effect so that we have much more than the weapon of mere industrial development certificates but other effective weapons by which distribution of industry can be adequately carried out in the areas which need industry?

Mr. Macpherson: I endeavoured to explain in the debate on the 26th of last month how this worked. I think that the main answer to the hon. Gentleman is that the proportion of extra employment provided from industrial development certificates in relation to the insured employees in development districts is 2· 1 per cent. In the areas I have mentioned— the Midlands, London and the South East— the proportion is 0· 8 per cent. This means that there are twice as many jobs coming from I.D.C.s in relation to employment in the development districts as elsewhere.

Mr. Lawson: Does not the hon. Gentleman agree that many more jobs are being provided in areas of high employment than are being provided in this way in development districts?
These measures touch only a small part of the number of new jobs being created. New jobs are being created every day outwith his control? Will he ensure that he has more adequate control than this method?

Mr. Macpherson: To some extent that is true with empty factories, and so forth, but it is also true in the development districts and other parts of the country.

New Offices

Mr. Lawson: asked the President of the Board of Trade what legislative or other proposals he has for controlling the growth of new office employment to ensure its distribution to areas of high unemployment.

Mr. N. Macpherson: I would refer the hon. Member to the statement I made on this in the course of the debate on distribution of industry on 26th June.

Mr. Lawson: Is not this just one of the examples that we have in mind where thousands of jobs are being created in areas of high employment such as London and the Midlands? Is it not time that steps were taken to control office building as well as factory building? Office work is surely as much an industry as factory work. If it is proper to control the location of factories, why is it not proper to control the location of offices?

Mr. Macpherson: It is very difficult to debate this matter by way of Question and Answer. We had an opportunity of debating it a few days ago.

Mr. Jay: Will the hon. Gentleman at least undertake to examine mare seriously the practical suggestions made in last week's debate and not merely give routine answers?

Mr. Macpherson: I said in last week's debate that we were examining the whole question. I cannot go further than that.

Local Employment Act (Scotland)

Mr. Rankin: asked the President of the Board of Trade what percentage of the insured population of Scotland is in the development districts.

Mr. N. Macpherson: Of the estimated number of insured employees in Scotland at the end of May, 1961, 63· 8 per cent. are in the areas now listed as development districts. Excluding districts on the stop list the percentage is 60· 5.

Mr. Rankin: Is not that a very high percentage? Does not it emphasise even to the Minister the very serious nature of Scotland's unemployment situation? Does he not think that he is doing insufficient, even through the Local Employment Act, to deal with this problem? Will he take other initiatives to meet Scotland's demand for jobs?

Mr. Macpherson: We are giving the full benefits of the Local Employment Act to all of this 60 per cent. in Scotland. We do not think that it would be right to give the same benefits to the other 40 per cent.

Mr. Hoy: asked the President of the Board of Trade what has been the nett percentage increase in employment in Scotland arising from the operation of the Local Employment Act.

Mr. N. Macpherson: The Local Employment Act is designed to provide additional employment for those living in areas of high unemployment. It is not possible to relate the increase in employment in the areas to changes in total employment in Scotland as a whole. About 29,000 jobs are estimated to have been provided from projects for which assistance has been offered under the Act.

Mr. Hoy: A considerable number of jobs have gone out of existence. In view of the figures which the Minister has just given in answer to the Question of my hon. Friend the Member for Glasgow, Govan (Mr. Rankin), will he have another look at the working of the Local Employment Act to see whether it is doing the job which it should be doing in these areas?

Mr. Macpherson: We are looking at and administering this Act from day to day. We believe that, in relation to the amount of industry on the move, Scotland is getting a good share of what is available.

Scotland

Mr. Bence: asked the President of the Board of Trade what progress has been made in the last two months in

encouraging new industrial enterprises to come to Scotland.

Mr. N. Macpherson: In the last two months approval has been given for 31 projects in Scotland, estimated to give rise to some 3,300 jobs, almost all of them in development districts. In addition, some 16 firms new to Scotland have been shown possible sites, but it is too early to say whether any of these will set up factories in Scotland.

Mr. Bence: Is the hon. Gentleman aware that many of the newer industries which are being established employ very few people compared with many of the old industries going out of existence? Will he do something to accelerate the increase in industry in Scotland in view of the fact that the rate of the loss of jobs in Scotland is about one-and-a-half times as fast as the creation of new jobs? The position in Scotland is getting worse instead of better.

Mr. Macpherson: The balance between the loss of jobs and the provision of new jobs varies from time to time. There have been periods, not very long ago, when the number of new jobs being provided was greater than the number of jobs being lost.

Mr. Manuel: Can the Minister indicate what progress has been made in the last few months in securing permission to build an advance factory at the Kilwinning Industrial Estate, in North Ayrshire, where unemployment is over 5 per cent.? This estate has had only one factory since 1948. Site preparation and servicing cost over £ 100,000.

Mr. Macpherson: I note what the hon. Gentleman says.

Cowdenbeath Central Workshops

Dr. A. Thompson: asked the President of the Board of Trade what consultations have taken place between his Department and the National Coal Board on the proposed closure of the Cowdenbeath Central Workshops.

Mr. N. Macpherson: My right hon. Friend is informed that the National Coal Board has no immediate plans for the closure of its central workshops at Cowdenbeath. The Cowdenbeath Town Council has suggested that the workshops


might be put to some alternative use, and the Board of Trade is pursuing that suggestion in co-operation with the National Coal Board.

Dr. Thompson: Since these workshops constitute not an uneconomic colliery but a highly efficient productive unit and make up the last remaining industry of any importance in Cowdenbeath employing nearly 400 people, will the hon. Gentleman watch this matter very closely?

Mr. Macpherson: Yes, Sir.

Mr. W. Hamilton: Can the hon. Gentleman confirm or deny the long-term intention of the National Coal Board to close these workshops? Is not this the inevitable trend which everyone in the area reoognises? Since Cowdenbeath is in the centre of a development district under the Local Employment Act, will the hon. Gentleman have further consultations with the National Coal Board to see whether these workshops can be used as central workshops for the whole mining community in Scotland?

Mr. Macpherson: I note the hon. Gentleman's suggestion, which is not along the lines of what we were discussing with the National Coal Board.

Oral Answers to Questions — TOBACCO ADVERTISING

Mr. F. Noel-Baker: asked the Prime Minister what representations he has received from the Advertising Inquiry Council about tobacco advertising; and what reply he has sent.

The Prime Minister (Mr. Harold Macmillan): The hon. Member wrote to me in his capacity as Chairman of the Executive Committee of the Advertising Inquiry Council Limited about the Council's Report on tobacco advertising. I informed the hon. Member that the conclusions of the Report are being taken into account in the Government's present consideration of the problem.

Mr. Noel-Baker: Are we to take it from the Prime Minister's reply that the Government have done nothing about and as yet have formed no opinion on the value of advertising, notwithstanding this report and the report of the Royal College of Physicians pub-

lished a good many weeks ago? Will the right hon. Gentleman treat this matter as one of very great urgency deeply affecting the health of the nation?

The Prime Minister: As I told the House earlier, I am not yet in a position to make a full statement. Certain action has been taken regarding posters and other such action. There has been action concerning the time in which some of these advertisements appear on television.

Mr. Gaitskell: Can we expect a statement before the Summer Recess?

The Prime Minister: I hope so. I cannot be certain. The date on which the hon. Member for Swindon (Mr. F. Noel-Baker), who is chairman of the executive committee of this organisation, wrote to me was at the end of May.

Mr. Lipton: When will the Government take their courage in both hands and stand up to the commercial T.V. interests, the tobacco barons and such people? When will the Government show some courage in grappling with this matter?

The Prime Minister: The hon. Gentleman, in his passion for order, must have regard to the importance of freedom.

Mr. Noel-Baker: In view of the Prime Minister's reply, I shall seek to raise this matter on the Adjournment before the Summer Recess unless a statement is made.

Oral Answers to Questions — EUROPEAN ECONOMIC COMMUNITY

Mr. Hector Hughes: asked the Prime Minister if he will state the number and nature of the communications he has received during the last two months from the Prime Ministers of the nations of the British Commonwealth on the subject of the Common Market.

The Prime Minister: Any communications of this kind which I might receive from other Commonwealth Prime Ministers would be confidential.

Mr. Hughes: In view of the very great importance of the communications and the Prime Minister's replies to the solidarity of the British Commonwealth,


will he issue them in the form of a White Paper well in advance of the forth-coming Commonwealth Prime Ministers' Conference so that they can be fully considered by all members of the Commonwealth and by this Parliament before the Summer Recess?

The Prime Minister: I should point out that the communications are confidential. Nevertheless, there have been very close discussions. My right hon. Friend the Lord Privy Seal has been to two or three Commonwealth countries, as has the Commonwealth Secretary. We have had the good fortune to have here the Prime Minister of Australia and the Deputy Prime Minister of New Zealand. That is on the Ministerial level. At the official level, there is the closest consultation all the time. It is not possible to publish the results of long discussions on highly technical subjects covering, as I say, 27 independent countries and 47 dependencies.

Mr. Biggs-Davison: Considering the vital Commonwealth interests involved, would it not be true to say that in general these communications have been restrained and helpful? If so, is it not incumbent on those in the United Kingdom who have responsibility to speak with courtesy and restraint of Commonwealth partners who stood with us in 1940 when all our European allies had been struck down?

The Prime Minister: Yes, of course. The discussions which we have had have been carried on with the greatest good will. People have said what they had to say, but I have enjoyed very much the discussions which I had. If my hon. Friend is referring to a statement made by my right hon. Friend the Minister of Agriculture, Fisheries and Food,— [Laughter.]— by my right hon. Friend the Minister of Labour, then I think that I should say that he proposes to make a statement after Question Time.

Oral Answers to Questions — B.A.O.R.

Mr. Shinwell: asked the Prime Minister what representations he has received from Dr. Adenauer, the German Federal Chancellor, on the conduct of British forces in Germany.

The Prime Minister: None, Sir.

Mr. Shinwell: Is the Prime Minister prepared to agree that the absence of official representations indicates that there is no general dissatisfaction in Germany about the behaviour of our troops?

The Prime Minister: Yes, Sir. I feel that this is a matter which we should try to get into proportion. Of course, it is very desirable that there should be the best possible relations, but I am bound to say that my own sympathy is with the rather robust views expressed by the hon. and learned Member for Northampton (Mr. Paget) the other day.

Mr. Dugdale: The Secretary of State for War said in the statement which he made on this subject that troops were being confined to barracks not as a punishment but for their protection. Will the Prime Minister say whether similar protection is being afforded to the officers?

The Prime Minister: All this is, I think, to be debated on Thursday. Perhaps, therefore, we can leave it until then.

Mr. Nabarro: In view of the historic and well-known ebullience of the Scottish Rifles, or the Cameronians, in barracks in peace time, will my right hon. Friend consider interceding at an early date to put an end to this unfortunate curfew on single men being recalled to barracks at midnight, which seems to me a collective punishment not entirely justified having regard to the absence of official representations from the West German Government?

The Prime Minister: This matter is the responsibility of the Secretary of State for War, and I will give him every support. It should be fair to say that it is our duty to support the officer commanding and to take account of his wishes.

Mr. Shinwell: Is it not also our duty not only to defend our troops in Germany against grave charges made against them, very few of which are justified, but more particularly as there appears to be more delinquency among the civil population in this country and elsewhere than among our troops?

The Prime Minister: I am very glad to add to what I said and to what the


Secretary of State for War said and to defend our troops from the attacks which have often been made by the Press either in peace or in operations and which are nearly always unjustified.

Oral Answers to Questions — NEW SCHOOL, MONKSEATON

Dame Irene Ward: asked the Prime Minister what action he has taken to co-ordinate the provision by the Minister of Transport and the Minister of Education of safe access for the pupils to the new grammar and technical school in Monkseaton.

The Prime Minister: As the provision of a safe access to this school is a matter for the local authorities and not for either of the two Ministries, no question of co-ordination between them arises. But as my right hon. Friend the Leader of the House said during the debate on 7th May, the Government have every confidence that safe access will be provided.

Dame Irene Ward: Is it not a fact that the building of schools is under the control of the Minister of Education and that in the debate I suggested that before sites were allocated the Minister should satisfy himself that there is safe access for children? May I ask my right hon. Friend what is the use of having a lot of accepted Motions in the interests of democracy littering up the Order Paper if no action is taken? Would he like his grandchildren to go to a school where there is no safe access and where they might be run over?

The Prime Minister: I think the really important thing is that this approach, or method of access, or whatever it is, should be completed before the school opens, and as I understand that it is not likely to open for some time, I hope that the two local authorities, with the help of the publicity given, will get together to solve this problem.

Oral Answers to Questions — NUCLEAR WEAPONS

Mr. Zilliacus: asked the Prime Minister whether the understanding he now has with President Kennedy that neither Government will use nuclear weapons in any part of the world without consulting the other includes an

undertaking by the United States Administration not to fire Polaris missiles from United States submarines anywhere on the high seas without such consultation.

The Prime Minister: In addition to the special agreement which I announced in November, 1960, for the use of Holy Loch facilities the Polaris submarines are included in the general understanding with the President of the United States to which I referred last week.

Mr. Zilliacus: The Prime Minister said that this understanding was the same as it had been under the previous administration. Is it not a fact that the last time a claim of this sort was made it was repudiated by Washington? Has there been a new agreement specifically covering the question of Polaris missiles from United States submarines on the 'high seas? If not, what becomes of this obligation about consultation? If there is one, when was it concluded and what is its nature?

The Prime Minister: I have nothing to add to what I have said about the special agreement on Polaris submarines. There is a general understanding between us that every effort has been made and will be made for the closest consultation. It stands to reason. Can anyone imagine the head of a democratic State which is a nuclear Power letting loose these weapons without consultation with an allied State which is also a nuclear Power?

Dr. A. Thompson: asked the Prime Minister whether he will consult President Kennedy with a view to submitting to the United Nations a joint proposal for avoiding the further development of national nuclear forces.

The Prime Minister: It has been agreed that the question of the non-dissemination of nuclear weapons will be discussed by the Disarmament Conference when it reassembles this month, and a report on the Conference's work will be presented to the General Assembly at the next session.

Dr. Thompson: Will the Prime Minister say whether or not he agrees with the growing volume of military opinion, particularly in the last six months, that the nuclear deterrent is too indiscriminate and dangerous a weapon for the


pursuit of purely national objectives in order to satisfy considerations of empty national prestige, and that a comparatively weak national nuclear force affords the maximum of risk and the minimum of security?

The Prime Minister: The hon. Gentleman has read a very interesting statement which I would prefer to study before I say whether I agree with it or not. I agree that all forms of weapons are very dangerous and that all forms of war— many of us have suffered from them— whether conventional or unconventional, are very unpleasant and that the object of all policy should be to see that wars do not take place and that disarmament is proceeded with.

CHINA (OFF-SHORE ISLANDS)

Mr. Zilliacus: asked the Prime Minister what consultations he has had with President Kennedy regarding the committal of British forces to assist the United States Government in taking military action to prevent the Chinese Government recovering the possession of the Chinese coastal islands of Quemoy and Matsu.

Mr. A. Henderson: asked the Prime Miniser what discussions he has had with President Kennedy on the question of British participation in the defence of Formosa and the Pescadores.

The Prime Minister: Any discussions which I may have with President Kennedy would be confidential. Britain has no obligation or commitment of any kind to take military action for the defence of Quemoy, Matsu or Formosa.

Mr. Zilliacus: While I am grateful for this small mercy, will the Prime Minister confirm that the Government continue to recognise that Quemoy and Matsu are part of the territory of the People's Republic of China, and will he draw the attention of President Kennedy to that fact?

The Prime Minister: This matter has been discussed for some time. I think that it was Mr. Anthony Eden, as he then was, who laid down the doctrine we hold on this, and we have not departed from it.

Mr. A. Henderson: In view of the statement yesterday of Mr. Khrushchev

as to the danger of a world conflict, can the House take it that Her Majesty's Government will be in close consultation with the United States Government with a view to preventing any aggressive action by the Chinese Nationalist authorities in Formosa against the Chinese mainland?

The Prime Minister: Her Majesty's Government are always in the very closest consultation on this and other matters with the American Government.

Mr. Ridsdale: In spite of the warlike utterances coming out from China at the moment, is it not time that the initiative was taken to try to get trade going between the Chinese mainland and the free world?

The Prime Minister: We, the Board of Trade and our own traders, have done a good deal, and I think that it is very satisfactory how far our trade with China has increased. This, of course, is limited by the fact that China has only a limited amount of exports with which to purchase the necessary currency to pay for her imports.

Mr. Gaitskell: Can the right hon. Gentleman say whether there is any serious threat on the part of the nationalist forces in Formosa to invade the mainland, on the one hand, or any serious threat from the Chinese Communists to invade Quemoy and Matsu, on the other?

The Prime Minister: I would have thought very little, but in view of the high authority quoted by the right hon. and learned Member for Rowley Regis and Tipton (Mr. A. Henderson), I thought it better to be fairly quiet about it.

COMMITTEES AND COMMISSIONS

Dr. D. Johnson: asked the Prime Minister whether he will consider alternative methods of seeking advice on the issues of the day, other than by the appointment of committees and commissions manned by members who have no responsibility to the electorate.

The Prime Minister: If my hon. Friend has any specific suggestions to make, I will naturally consider them.

Dr. Johnson: Is my right hon. Friend aware that while the committee that was in my mind when I put this Question down and my comments concerning it were considered unsuitable for the Order Paper, none the less this Question is meant in general terms? Is he not aware that in other spheres also appointees are made to these committees and commissions whose attitude of mind is preponderantly alien to that of many of the electors who put the Government into power, and will he not consider the galaxy of talent which is available to him in other directions?

The Prime Minister: I think that my hon. Friend has made his point. Just as there are some comments which may not be suitable for the Order Paper, there are other things that may not be suitable to be reported in HANSARD, so I will just take note of what he has said and leave it at that.

Mr. J. T. Price: In view of some recent strange decisions of Her Majesty's Government, can the Prime Minister assure us that he does not consult astrologists?

The Prime Minister: There are lots of eggheads and lots of highbrows, but we do not have any astrologists, so far as I know, on the panel. There is a certain Dr. Gallup who ought to be considered.

NATIONAL SOCIALIST MOVEMENT (MEETING. TRAFALGAR SQUARE)

The Secretary of State for the Home Department (Mr. R. A. Butler): You're your permission, Mr. Speaker, and by, I think, the wish of the House, I should like to make a statement about a meeting organised by the National Socialist Movement and held in Trafalgar Square on the afternoon of Sunday last.
I am informed that this movement has less than 100 members. The Commissioner of Police of the Metropolis tells me that the meeting began with about 2,000 people present. Later, the number rose to about 5,000. The speakers were interrupted by an organised body of 300 to 400 persons. The police found it necessary to stop the meeting on two occasions while order was restored, and eventually closed it altogether on the

ground that a serious breach of the peace was imminent.
Twenty arrests were made and there were 15 cases of offences under Section 5 of the Public Order Act, 1936. All but two of these cases have been dealt with by the courts, and offenders have been fined or conditionally discharged. The speakers themselves were not arrested. I am told that a full report is being submitted for consideration of proceedings under Section 5 of the Public Order Act.
I deplore the disorder which occurred on this occasion and, even more, the obnoxious doctrines expressed. As I have indicated, the police dealt firmly with the situation, and I believe the existing powers to be adequate. We must not put ourselves in a position of lightly restricting free speech. However, I wish to make it quite clear that we shall not tolerate provocation of disorder by the abuse of free speech. I shall, therefore, watch the position with care and shall consider any representations that right hon. and hon. Members may wish to make to me.

Mr. Shinwell: May I, first, express my gratitude to the right hon. Gentleman and also to the Leader of the House for their prompt attention to this matter?
Is the right hon. Gentleman aware that, in the questions I venture to put on this subject, it is not intended to interfere in any way with free speech but only with free speech accompanied by provocative language and offensive statements which are directed against certain members of the community?
As his statement indicated, the right hon. Gentleman is aware that several people who were arrested on the ground of breach of the peace have been fined, while, on the other hand, those responsible for the provocation have gone scot-free. Will he take note of that, take whatever action he regards as necessary in the circumstances, and, more particularly, carry out his apparent intention to prevent provocative meetings of this kind from taking place in future?

Mr. Butler: Yes, Sir. On the first point, proceedings are under consideration under Section 5 of the Public Order Act in the case of the speakers, who were regarded as the most provocative


people on this occasion, and, therefore, I cannot interfere in connection with that.
As regards the situation generally, permission was given by my right hon. Friend the Minister of Works under his powers in relation to Trafalgar Square. I am quite satisfied that he was perfectly right in giving that permission after receiving the advice of the Commissioner of Police of the Metropolis, whom I have myself seen. The Commissioner's advice was given after consideration of previous meetings of this type, which have not led to public disorder. However, I should like to say, after having' seen the Commissioner, that I am quite satisfied that my right hon. Friend the Minister of Works— and I myself in so far as I am brought into it— will work in future from the experience gained from this meeting.

Sir H. d'Avigdor-Goldsmid: While thanking my right hon. Friend for the tone of his statement, may I ask him whether he realises the depth of feeling that is caused by the utterance, in the centre of London, with a mass of police protection, of doctrines which are not only obnoxious but which are being condemned by the judgment of the whole world? Does he also realise that, while the right of free speech is precious to us, if Trafalgar Square, the heart of London, is to be used as the centre for the propagation, with police protection, of these diabolical views, the rest of the world will simply fail to understand how we can put free speech in all its forms above something so debasing and so affronting to the conscience of all British people?

Mr. Butler: I very much sympathise with my hon. Friend's observations on the quality of what was said on this occasion and on its content, but I must say, having regard to previous experience in September, 1960, and April, 1961, when meetings of this sort went off without any particular interest and— as was reported to me by the police— with boos and catcalls but without disorder, I think that it was reasonable to hope that that would happen on this occasion. It has not been the case, however, and it is these new circumstances which we are taking into account.

Mr. G. Brown: Is the right hon. Gentleman aware that to a large number of people it seems extraordinary that, while Section 5 of the Act is clearly directed against those who provoke, it was only those who were provoked who appear to have been proceeded against on Sunday? Will he consider whether the Act is strong enough to deal with provokers themselves, who use, in the words of the Act,
… threatening, abusive or insulting words…
and, if he finds that it is not strong enough, consider the legislation in other countries? I am told that in Holland and the Scandinavian countries legislation specifically prohibits this kind of racial attack. Will he consider amending the Public Order Act so that this specifically becomes an offence?

Mr. Butler: I said on purpose at the end of my statement that I would listen to any representations made by right hon. and hon. Members. I will certainly pay attention to the representations made by the right hon. Member for Belper (Mr. G. Brown). At the same time, I must draw attention to the fact that proceedings are under consideration against those who provoked these disorders, so I cannot comment on those. I would rather not take it further today. If the right hon. Gentleman wishes to substantiate his point, I would be glad to hear from him further.

Mr. S. Silverman: Can the right hon. Gentleman explain a little further? Whose is the actual responsibility for allowing Trafalgar Square to be used? Is it his responsibility, through the Commissioner of the Metropolitan Police, or is it the responsibility of the Minister of Works? In either case, on what principles is the responsibility exercised?
Moreover, in dealing with future applications for the use of the Square— and I am sure that he will agree with me in this— will he consider that the world did not fight six years of bitter and bloody war at the cost of 50 million human lives in order to permit Mr. Colin Jordan to recommend the British people to imitate Adolf Hitler?

Mr. Butler: My right hon. Friend the Minister of Works gave a full answer, including his reasons, last Tuesday in HANSARD, column126–7,in answer to the


hon. Member for Leicester, North-West (Sir B. Janner). If the hon. Member for Nelson and Colne (Mr. S. Silverman) will direct his attention to that Answer, he will see the reasons which brought my right hon. Friend to this conclusion.

Mr. Ronald Bell: Will my right hon. Friend discuss with the Minister of Works whether it is really a good idea to have controversial meetings in Trafalgar Square at all, because, if a Minister of the Crown has to authorise these meetings, and if he is to exercise the sort of discrimination and censorship indicated in some of the questions this afternoon, will we not find ourselves in a very difficult position?
Would it not be sensible to treat Trafalgar Square as a great square and national monument and not one that ought to be used for intensely controversial purposes of any kind? Will he discuss that with the Minister of Works? I believe that there is a considerable body of opinion in the country which feels that way?

Mr. Butler: I will certainly discuss it with my right hon. Friend, but it has for long been a tradition that a certain freedom of expression of opinion should be allowed. I think that this is one of the things which has created the greatness of our country. I will discuss the suggestion of my hon. Friend with my right hon. Friend the Minister of Works, but I do not think we shall get very much further on that.

Sir B. Janner: Is the right hon. Gentleman aware that apart from the Public Order Act, the courts have held, in the case of Duncan v. Jones, that once it is apprehended that there will be a breach of the peace it is the duty of the police to prevent a meeting being held? As there was not the slightest doubt that the susceptibilities of decent people would be badly hurt by the kind of trash and obscenities that are always uttered by these people, it was obvious that there would be a breach of the peace.
Will the right hon. Gentleman see to it in future that if there is such an apprehension a meeting of this description shall not be held? Is the right hon. Gentleman further aware that the

speakers declared themselves to be Nazis, and that this word in itself is an abhorrence to all civilised people?

Mr. Butler: I considered the case of Duncanv. Jones, reported in 1936, King's Bench Division, at page 218, and I discussed this morning with the Commissioner the question of when the police should or should not have intervened. It is clear, as the hon. Gentleman makes out, that the police could intervene even from the outset, on the basis of this judgment. The police twice stopped this meeting, and eventually stopped it altogether. In future, they may take a stricter line, but I am satisfied that they were proceeding on the understanding that they should allow freedom of speech prior to stopping the meeting.

Several Hon. Members: Several Hon. Membersrose—

Mr. Speaker: Order. We have so much to do that we really must make progress.

NATIONAL ASSISTANCE (INCREASED RATES)

The Minister of Pensions and National Insurance (Mr. Boyd-Carpenter): I will, with permission, make a statement about National Assistance.
I have received from the National Assistance Board proposals under Section 6 of the National Assistance Act, 1948, for further increases in the current rates of National Assistance which came into operation, as the House knows, on 3rd April, 1961. I have accepted the Board's proposals and have made draft Regulations accordingly. These have been laid today and together with copies of an explanatory memorandum by the Board are now available in the Vote Office.
These draft Regulations require the approval of both Houses of Parliament by affirmative Resolution.
Subject to this approval being given, the Regulations will provide for the weekly rates for a single householder to be increased by 4s. from 53s. 6d. to 57s. 6d., for a married couple by 5s. 6d. from 90s. to 95s. 6d., and for adults living as members of somebody else's


household by 2s. from 49s. 6d. to 51s. 6d. Appropriate improvements are also proposed for young people and children.
As the House will see, when hon. Members have had an opportunity to study the draft Regulations, the Board has on this occasion felt that rather more proportionately should be given to the single householder than to other people.
I should add that broadly proportion- ate increases are also proposed in the special scales relating to blind and certain tuberculous people. The rate for a married couple of whom one is blind will, for example, be raised by 7s. 6d. to £ 6, and for a single Mind person by 6s. to 82s. All the rates I have quoted are, of course, exclusive of rent, for which separate provision will continue to be made.
Subject to the approval of Parliament it is proposed that these new improved rates will be paid from 24th September. On the bases of the present numbers of cases their additional cost will amount to about £ 20½ million in a full year.

Mr. Houghton: Is the right hon. Gentleman aware that this will be welcome news to nearly 2 million people who are still living on National Assistance? Is he also aware that these amounts are still too small and long overdue? Does he suggest that £ 2 17s. 6d. a week exclusive of the rent is any sort of living in Britain today for a single person who is a householder, or £ 4 15s. 6d. plus rent for a married couple? Does not he appreciate that the cost of living has gone up seven points since the last increase in April, 1961, and will he tell the House how much is included in these miserable amounts for the rising prosperity of the country? Is this the mark of an affluent society? Cannot the right hon. Gentleman bring this small increase into operation earlier than 24th September? Finally, when is it proposed to debate this matter in the House?

Mr. Boyd-Carpenter: The question of a debate, as the hon. Gentleman knows, is a matter for my right hon. Friend the Leader of the House, but prior to coming to the House for affirmative Resolution the Regulations will, in the ordinary

way, have to go before the Select Committee on Statutory Instruments.
On the substance of the hon. Gentleman's question, the amounts, these proposals of course continue the process, of which this is the seventh example under the present Government, of not only maintaining, but improving, the real value of these allowances on which, as he rightly said, the poorest section of our community has to live. I should have thought that the substantial cost of this increase— £ 20½ million in a full year— was the best possible indication of the determination of the Government to maintain their standard.
The final result. if the House approves these scale rate improvements, will, on the basis of the 1948 scales, be that whereas the Index of Retail Prices will have risen since then by 70 per cent., the new figures for householders will amount to an increase of very nearly double that figure— about 139 per cent.
The date is very much in line with the time between announcement and coming into operation on a good many previous occasions. I hope that the House will think that the choice of a date which is really at the beginning of autumn, when, as hon. Members know, the colder weather imposes particular difficulties on the poorest of our population, is socially sensible.

Lord Balniel>: While warmly welcoming these increases to those with the greatest need, may I ask my right hon. Friend whether these figures bring the assistance rates up to the value of the 1961 increases? Further, can he explain why he has placed this tremendous emphasis on the single person as opposed to the married couple?

Mr. Boyd-Carpenter: First, these proposals will, in the case of the single householder appreciably, and in the case of the married couple by a smaller margin, more than restore the values which the scale rates which came into operation in April, 1961, then had.
The greater emphasis on the single householder is effected because, in the view of the Board, which I wholly share, previous increases have been weighted rather more in favour of married couples. If I might recall the figures I quoted a moment ago, the net result will be that in terms of the original 1948


scales the single householder's increase will be 139· 5 per cent and the married couple's 139 per cent. In other words, on the basis of the original scales, this practically brings them back into line.

Mr. Grimond: While welcoming the proposals, may I ask two questions? First, will the right hon. Gentleman reconsider the date, if it is possible to do so? I agree that the proposed date is when the colder weather comes along and that many of these people then need extra fuel and clothing, but much of this fuel and clothing can be obtained more cheaply in the next two or three months.
Secondly, so far as these proposals are a recognition of the rising cost of living, can the Government say whether they will also look at other classes of pensions, say, public service pensions and the pensions of other people whose increases have been held down in spite of the increase in the cost of living?

Mr. Boyd-Carpenter: As I am sure the right hon. Gentleman knows, public service pensions do not come within my responsibility but are the responsibility of right hon. and learned Friend the Chancellor of the Exchequer.
As regards the date, the right hon. Gentleman will appreciate that making the individual alterations in the 1,870,000 or so order books is a substantial operation which, of course, cannot be initiated until Parliament has had an opportunity to approve, and has approved, the draft Regulations. And, as I said earlier, this is very much in line with some previous occasions. I think that the right hon. Gentleman will appreciate that the time when the colder weather comes along is when particularly the older people concerned really begin to feel the pinch.

Mr. F. M. Bennett: While also warmly welcoming the increases, may I ask my right hon. Friend whether he has contemplated a change in the basic minimum levels at which a person can qualify for National Assistance, either as regards assets or income? He will appreciate that it is not very valuable to raise the maximum level if, at the same time, we still prevent those obtaining assistance who are at present precluded from doing so despite the rise in the cost of living.

Mr. Boyd-Carpenter: As my hon. Friend knows, the increase in the scale rates of itself makes a certain number of further people eligible for National Assistance because the raising of the scales enables people previously outside to be brought in. We thoroughly reviewed the disregards and very substantially increased them by legislation in the autumn of 1959, and I have no further proposals at this stage for anything of that sort.

Mr. Houghton: Will the right hon. Gentleman inform his right hon. Friend the Leader of the House that my hon. Friends will be willing to expedite the approval of these Regulations by the House, especially if that would result in bringing the operative date forward from 24th September? Does the right hon. Gentleman realise that all these percentage cross-references to the past and talk of percentage increases and statistical information means nothing whatever to the people who are living on these National Assistance rates? These rates will be judged by the practical day-to-day experience of those who have to live on them, and—

Mr. Speaker: The hon. Member's question is beginning to sound very much like a speech.

Several Hon. Members: Several Hon. Membersrose—

Mr. Speaker: Mr. Speaker: Order.

Mr. Houghton: I had not quite completed my question, Mr. Speaker. May I complete it?

Mr. Speaker: We must pray the Minister's mercy. I would point out that we have so much to do and that many hon. Members are wanting to ask questions. They will not be able to do so because there will not be time. Perhaps the hon. Member for Sowerby (Mr. Houghton) will help me by rounding his question off in a nice, quick way.

Mr. Houghton: My final question is, has the right hon. Gentleman anything to say about National Insurance rates, or shall we have to wait for that until a little nearer the General Election?

Mr. Boyd-Carpenter: The hon. Gentleman will have gathered that my statement related to National Assistance. I am obliged to him for his offer of help in getting the Regulations through. However, they will have to go through the normal procedure of the Select Committee and the House.
As regards his more rhetorical comment, I feel that the people with whom we are here concerned, those on National Assistance, will find that these improvements are of real value.

Mr. Tiley: While the books are being altered and the necessary changes carried out, would it be possible for my right hon. Friend to consult the Minister of Health so that perhaps some form of certificate might be placed in the new books to enable those in receipt of National Assistance and other similar benefits to receive free medical prescriptions? The fact that these people must pay for them is one of the most important defects in our social services.

Mr. Boyd-Carpenter: That is primarily a matter for my right hon. Friend the Minister of Health, but I will certainly; pass my hon. Friend's suggestion on to him.

Mr. G. Brown: Is the Minister aware of the point made by my hon. Friend the Member for Sowerby (Mr. Houghton)? My hon. Friend was pointing out that we would do our utmost to facilitate the passage of these Regulations through the House— if the Minister likes, next week— if he will get on with the printing of the books so that the date of the payment can be brought forward. Will the right hon. Gentleman look into this matter? [Interruption.] I cannot understand the attitude of hon. Gentlemen opposite to this subject. I can assure them that the people on National Assistance will be very interested in the atmosphere on the back benches opposite. If we facilitate the passage of these Regulations, will the Minister look into the question of bringing forward the date of payment?

Mr. Boyd-Carpenter: I am always grateful for mercies, particularly from the right hon. Member for Belper (Mr. G. Brown), in the conduct of Parliamentary business. However, these Regula-

tions must go through the normal procedure of the House, including the Select Committee. The question of debating this matter is clearly not one for me, but I must tell the House that the operative date which I thought it right and fair to the House to announce was arrived at after considerable thought. Although we can, of course, discuss the date when we debate the Regulations, my own view— and I must put this frankly to hon. Members— is that this is, not only for administrative reasons but from the more important social point of view, just about right.

PERSONAL STATEMENT

The Minister of Labour (Mr. John Hare): With the permission of the House, I would like to make a personal statement about the meeting which I attended in my constituency last Saturday afternoon. At the end of the meeting I was asked a question which suggested that the Commonwealth Prime Ministers' Conference should itself decide by a majority vote whether or not Britain should agree to join the European Economic Community.
I pointed out in my reply that the United Kingdom had the obligation to secure terms which safeguarded the essential interests of the Commonwealth, our own home agriculture and our partners in the European Free Trade Area, but, at the same time, the decision as to whether we should join or not must rest with us.
In making my reply— as has been accurately reported in the Press— I drew on the analogy of the Commonwealth as a family of nations. I would never wish either to seem patronising or to say anything wounding to any country in the Commonwealth. On reflection, it is clear to me that what I said on the spur of the moment could be, and, indeed, has been, interpreted in a sense that I certainly did not intend.
Both as a Member of this House and as a private citizen I have always endeavoured to promote the interests of the Commonwealth. I therefore take this opportunity of expressing my deep regret to any in the Commonwealth who may have felt hurt by what I said.

BUSINESS OF THE HOUSE

Ordered,
That after consideration of the Finance Bill, as amended, the Bill may be immediately recommitted to a Committee of the whole House and considered in the Committee and may be considered by the House immediately after the recommittal and report thereof, notwithstanding the practice of this House as to the interval between the stages of such a Bill.— [The Chancellor of the Exchequer.]

CONTROL OF VENEREAL DISEASES

Mr. Richard Marsh: I beg to ask leave to bring in a Bill
to provide for the compulsory examination and treatment of persons suspected of suffering from venereal diseases by the restoration of provisions formerly contained in Defence Regulation 33B.
I make no apology for taking up still more of the time of the House this afternoon, despite the inroads that have already been made in it, or for raising a subject which is unpleasant and, indeed, one which most hon. Members regard with a degree of unhappiness. It is precisely because so many of us regard this as one of those topics which we do not wish to raise, think about or even discuss, that the situation has arisen whereby it is not realised by many people that this problem is now becoming a major and most serious growing social problem in this country. We all like to sweep these unpleasantnesses under a mental carpet, and as a result a situation has arisen which is deplorable and serious.
First, I want to give evidence why I think this has become a serious problem. In 1955, there were 94,698 new cases of venereal disease reported in this country. By 1960— these are the latest figures available— the figure had risen to 129,506. To give another example, the 1960 figures for new cases— not treatments or attendances— were 8 per cent. higher than the figures in 1959, and the 1959 figures were 12 per cent. higher than the 1958 figures. Consequently, the position is that the numbers have increased enormously, and, what is important, they are continuing to increase at a significant rate.
There are an even more serious facet, and to me a more tragic one. Our statistics are incomplete. The only figures I have been able to obtain from the Ministry of Health are for gonorrhoea, and they show that the most rapid increase is among children under the age of 19. Taking children between 15 and 19 in 1957, there were 1,767 cases, and in 1960 2,938 cases were reported. To take one area which happens to have carried out a survey, in Liverpool it was discovered that girls between the ages of 11 and 19 accounted for 37½ per cent. of all the cases notified of females with venereal diseases.
I do not think that it is possible to exaggerate the misery, suffering and unhappiness involved in these figures. Also, I do not think that it is of any great value to pass moral judgments. These are not wicked people. They may be stupid and often very selfish, and they are certainly very unhappy, but they are people many of whom will be crippled, blinded and even killed, because in 1960 there were in this country 637 deaths from syphillis alone. Even worse, as a result of all these figures there are children not yet conceived whose lives will be ruined by congenital syphillis. Therefore, it is a problem of such seriousness and magnitude that I have the temerity to interrupt the proceedings of the House this afternoon to bring before hon. Members a subject which I recognise is unpleasant.
Of course, we cannot solve the problem quickly. Fortunately, or unfortunately, sex is one of the things which cannot be controlled by legislation. But there are things which the House could do, and the small Bill which I ask leave to introduce seeks to do two things.
The first problem which arises, farcical though it may seem to hon. Members, is that when a person is diagnosed by a medical practitioner as suffiering from a venereal disease and gives the name of the person from whom he or she may have caught it, the medical practitioner is not able to notify that person that he or she should go for treatment, or even examination, because under our peculiar laws of defamation and libel no medical practitioner dare take the risk of writing perhaps to a girl of 18 or 19 whom he has never seen and saying, "Dear Miss So-and-So, I believe


that you may have syphillis, and I suggest that you seek treatment." Therefore, the first thing the Bill seeks to do is to remove the risk of action for defamation to a medical practitioner in the process of notifying a suspected contact.
Secondly, there is what is to me an equally incomprehensible situation in existence. There is nothing in our law which prevents any person who is known to be suffering from venereal diseases at any level refusing point blank to accept treatment. Indeed, in every one of our prisons every year hundreds of people— not one or two— whom it is suspected may have veneral disease— professional prostitutes, for example— refuse even to be examined.
Therefore, the second thing that the Bill seeks to do is to give authority so that on the second notification of a belief that a certain person has infected someone else the medical practitioner may on behalf of the local authority require that person to attend for examination and treatment within a period of seven days.
This is not a novel idea. In 1941, when manpower was the main problem which faced the country, we introduced legislation on these lines and in 1941, at the height of the war, the figures were less than half what they are today. That provision was in Defence Regulation 33B, and we have, of course, since repealed it.
The only argument which, in my view, can be levelled against the Bill is that it infringes personal liberty. But we are faced now with a problem which affects

not dozens, scores, hundreds or even thousands, but hundreds of thousands of our people. The moral judgments, the posters in the public lavatories and the little talks in the classroom by embarrassed teachers have not solved the problem. In the face of the figures which I have given, I believe that the House has no right to ignore the situation which exists and to allow a doctrinaire liberalism to be an excuse for doing nothing.
I again apologise for raising this issue at this stage in this way. Some of my hon. Friends for whom I have a great deal of respect suggested to me that it was not a very sensible thing for young politicians to talk about on the Floor of the House. But it is a tragic problem, and I seek leave to introduce the Bill in the hope that the House will make a contribution towards solving it.

Question put and agreed to.

Bill ordered to be brought in by Mr. R. Marsh, Mr. Ede, Dr. J. Dickson Mabon, and Dr. Barnett Stross.

CONTROL OF VENEREAL DISEASES

Bill to provide for the compulsory examination and treatment of persons suspected of suffering from venereal diseases by the restoration of provisions formerly contained in Defence Regulation 33B, presented accordingly, and read the First time; to be read a Second time Tomorrow and to be printed. [Bill 127.]

Orders of the Day — FINANCE BILL

As Amended (in Committee and on re-committal), further considered.

New Clause.— (RELIEF FROM SCHEDULE A FOR OWNER-OCCUPIERS.)

(1) Where the total income of an indvidual includes, or would, but for this section, include any sum chargeable to tax under Schedule A in respect of a house of which the individual is both owner and occupier, that sum shall be disregarded for all the purposes of the Income Tax Acts other than surtax or the furnishing of information:

Provided that this subsection shall not apply to any individual in respect of more than one house in any year of assessment.

(2) For the purposes of this section "house" includes any residence or dwelling and a house owned by a married woman living with her husband and occupied by them shall be deemed to be owned and occupied by the husband.

(3) The enactments relating to income tax, and in particular Part III of the Act of 1952, shall have effect as if subsections (1) and (2) of this section were contained in the said Part III between sections ninety-two and ninety-three.

(4) This section shall not be deemed to have required any change in the amounts deducted or repaid under section one hundred and fifty-seven (pay as you earn) of the Income Tax Act, 1952, before the twenty-second day of June, nineteen hundred and sixty-two. — [Mr. J. T. Price.]

Brought up, and read the First time.

4.8 p.m.

Mr. J. T. Price: I beg to move, That the Clause be read a Second time.

Mr. Speaker: I think that it would be for the convenience of the House if we were to discuss this new Clause together with the new Clause in the name of the right hon. Member for Orkney and Shetland (Mr. Grimond), "Abolition of Schedule A income tax", and the new Clause in the name of the hon. Member for Ashfield (Mr. Warbey), Rent allowance", neither of which is, strictly, selected.

Mr. Price: The new Clause which I have moved deals with a matter of very great public controversy which has been discussed throughout the country for some years and has often engaged the attention of the House. It seeks to relieve owner-occupiers of domestic

dwelling-houses of a form of taxation which is probably one of the most unpopular taxes that has been levied by the House in the domestic field. I refer to Schedule A, which under our present legislation levies tax at the standard rate on the net value of a dwelling-house under the provisions of the Income Tax Acts.
I do not wish to weary the House unduly by going through all the arguments for and against which have been so frequently ventilated here and elsewhere, but, to give the matter its right perspective, I think that I ought to say at once that my hon. Friends and I have made some progress. We are not claiming that we have always been completely consistent, but any party which refuses to retain an open and flexible mind on matters which, by their very nature, are complex, is not a party to which I should wish to belong. Therefore, I make no apology for saying at the outset that we in the Labour Party are prepared to support this important amendment of the law, which would completely remove Schedule A tax from all domestic dwelling houses.
The question of principle is, of course, relatively simple. The question of administration and the implications for the tax gatherer and the executive responsible for running the Treasury are complex. Perhaps I may deal, first, with the relatively simple matter of principle and say that I have long been convinced that the principle underlying this tax— the principle that it is possible for Parliament to levy a notional tax on a notional earning or advantage— is not one which ought to be supported in a modern Parliament. It is quite illogical.
Whether the merits can be sustained or not, it lies as a responsibility for the Government to defend if they can defend it. In logic, it seems ridiculous and absurd— this has been said so much more eloquently on other occasions by other hon. Members—

Mr. Gerald Nabarro: Hear, hear.

Mr. Price: I am glad to see the hon. Member here. If he will be tolerant and patient he may, for once in his life, agree with what I am about to say.
It seems irrational that Parliament should continue to defend the idea that


one can levy a large tax and place a penalty upon a citizen merely because he has been prudent or provident enough to invest his savings in a house to provide a home for himself and his family, that one can levy a serious tax on the net rateable value assessed on a man's dwelling-house, for which he has paid often by way of mortgage, whilst, at the same time, so many other forms of property in which money may be invested escape 'taxation, except perhaps Purchase Tax. For instance, a man may decide to buy a grand piano or even a saxophone, or a mink coat, or any of the many other articles which a man or his wife may like.
Furthermore, it has often been contended, and I think with great force, that this idea of a notional tax involves levying not only Schedule A tax, but something much more important and inequitable. It involves the principle of double taxation. After all, every owner of a dwelling-house is subjected to very substantial local taxation in the form of local rates which, unhappily, are always going up. Therefore, with the conceivable exception of Schedule B, which only covers a very narrow band of taxpayers and yields about £ 150,000 a year in revenue, this is the only case on record, even including the enactments which we have passed, in which this form of notional taxation is levied and which involves double taxation on the citizens involved.
4.15 p.m.
The extent of this tax is further aggravated by the numbers of people involved in paying it, and by the fact that very soon under the provisions of the Rating and Valuation Act, 1961, on the Standing Committee of which I had the honour to serve for some months, we shall be facing a situation in which all domestic dwelling-houses will be re-rated on the basis of their present-day values as compared with the 1939 values which form the basis of assessment at present.
This is a most serious and anxious prospect for anybody who owns a house in which he lives as a domestic dwelling. It is freely admitted by responsible Ministers of the Crown, with whom I have debated these matters in Standing Committee when the Measure was going through the House last year, that under

the Rating and Valuation Act rateable values are likely to increase by anything from 200 per cent. to 300 per cent. I am not concerned with the rate poundage, which may admittedly be adjusted in certain directions, but I am concerned with the rateable value because the rateable value assessed by local authorities will form the basis of Schedule A liability under the new legislation.
If I am wrong in this, hon. Members will have an opportunity of putting me right later, but perhaps I ought to anticipate any possible criticism of what I am now saying, I hope with a proper sense of responsibility and with no desire to make any exaggerated or irresponsible statements. It is expected by the Minister of Housing and Local Government, whose responsibility this is on the narrow sector of rateable values, that it may inflict great hardship in increased rates on certain people. A cushion has been built into that legislation, because for five years it is possible for the Minister of Housing and Local Government to issue an Order in which the new rates will be abated by certain percentages.
But, so far as I am advised— if I am not fully up-to-date on this I will willingly concede the point if I am wrong — there is no provision in the Rating and Valuation Act which will provide the Chancellor of the Exchequer, his associates and officials with the machinery by which the liability for Schedule A will be reduced as compared with what it is now.

Mr. A. R. Wise: I believe that I am correct in stating that it has already been declared that the new rating assessments and valuations will have nothing whatever to do with Schedule A.

Mr. Price: I am obliged to the hon. Gentleman for his information. Naturally, if this is correct I should prefer to have it from the Treasury Bench and not from unofficial quarters. If the Chancellor cares to make a statement I shall be grateful.
Nevertheless, whatever the figures are and whatever the new liability might be, I contend that the tax can no longer be defended in principle, because it places an inequitable levy on those who own their own houses.

Mr. Donald Wade: I think that I may be able to help the hon. Gentleman if I quote from a statement made by the Chancellor of the Exchequer on 20th June last year:
The new rating valuation comes into force for England and Wales in April, 1963. We shall require specific legislation in the Finance Bill of that year to empower us to use the new valuations for Schedule A purposes, because the present Rating and Valuation Bill empowers us to use them only for rating purposes."— [OFFICIAL REPORT, 20th June, 1961; Vol. 642, c. 1356.]

The Chancellor of the Exchequer (Mr. Selwyn Lloyd): Perhaps I may be allowed just to supplement that and to remind the hon. Gentleman of what I said in my Budget speech, that
We will not seek to use the new rating valuations for Schedule A purposes so far as these owner-occupiers of residential property are concerned."— [OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 978.]

Mr. Price: I am, of course, obliged to the right hon. and learned Gentleman for restating what he put on record, but it is a strange thing that, in the absence of legislation, there is a widespread impression abroad among associations of owner-occupiers throughout the country that this will take place. If it does not take place, I for one shall be relieved, because it would further aggravate the injustice against which I am now pleading, and which I am pleading should be removed as a matter of principle.

Mr. G. R. Mitchison: Is not this a question of using assessments which have been made for another purpose? Is it not the case that there is no provision in the Income Tax legislation for using pre-war valuations which were specifically provided for in the case of rates and assessments for rates?

Mr. Price: Again, I am much obliged, because that was my understanding of the position. The provision is not there. The only code our citizens have to refer back to is the code embodied in Measures on the Statute Book.
It is all right to hear Ministerial statements, but as a matter of working practice it is much better to have this matter cleared up by legislation. Perhaps there is no need to labour that point any longer, for we have heard so many arguments in speeches about it from both

sides of the House, speeches favourable to the annulment of Schedule A tax, and speeches why it should not be annulled. I need not go into them now.
To get into proper perspective what it is I am arguing— as briefly as possible, I hope— it is important to remember that when this matter was debated on the Finance Bill last year, 1961, a proposal was sponsored by a number of hon. Gentlemen on that side of the House to remove the tax. It was defeated on a Division which took place at two o'clock in the morning. I do not think any Ministerial reply was made to the debate on that occasion. There was a good deal of cross-party and cross-bench debate going on and I do not think that any definite reply was made.

Mr. Nabarro: I moved a new Clause last year and a Division took place at 2.7 a.m., as reported in c. 1393 of HANSARD for 20th June, 1961. A detailed answer to my plea was made by my right hon. and learned Friend the Chancellor in a quite lengthy speech, the report of which begins at c. 1352. The hon. Gentleman has not done his homework.

Mr. Price: I thought that I was being very fair to the hon. Member. I did not want to refer to anybody—

Mr. Nabarro: The hon. Member may quote me. I do not mind.

Mr. Price: A desultory debate went on but, nevertheless, a specific announcement was not made by the Government about it. They were not favourable at the time, of course. Perhaps the hon. Gentleman will allow me to make my speech in my own way. He will, no doubt, get an opportunity to catch Mr. Speaker's eye and put me right later if I am wrong.
I do not want to delay the House any more than I need to, but I should like to quote a statement by the previous Chancellor of the Exchequer, Lord Amory, now High Commissioner for Canada. This takes us back to 21st June, 1960. He said:
I think that there are strong arguments both for and against relief from Schedule A for owner-occupiers. I have owned to a personal inclination to regard the arguments for some relief at a practicable time as meriting very serious consideration."— [OFFICIAL REPORT, 21st June, 1960; Vol. 625, c. 267.]


That was a sort of cautious, favourable statement, I would have thought, to come from the then Chancellor of the Exchequer. It did give rise to a good deal of feeling in the House— favourable feeling at the time, on both sides of the House; and hon. Members, particularly hon. Members on the Government side, did not hesitate to go round their constituencies telling to the electors that the Government were taking a favourable view of this and that very soon something would be done about it. Here we come, year after year, making the same plea, but nothing is done about it. The time has come for hon. Members to say definitely and go on record whether they are for or against giving this relief.
It will, no doubt, be argued in reply to what I am saying that there are 61 million people who are owner-occupiers, out of a total of about 13 million householders. Approximately half the house property is owner-occupied property. It will no doubt be argued that many of the owner-occupiers get reliefs in the form of maintenance allowances for painting and decorating and doing running repairs. Theoretically, they are entitled. to them, but, in practice, as the hon. Gentleman the Member for Kidderminster (Mr. Nabarro) pointed out on a former occasion, out of the 6½ million owner-occupiers, only 9 per cent., or about 600,000 ever claim any allowance at all.
A great many owner-occupiers are not occupying palatial mansions. There is a margin of people who awn large houses, and I freely admit that they would be brought within the scope of the relief which I propose in the new Clause, but I am concerned with the greatest good of the great majority of people Who are now paying this tax and are having to pay it, in my view, unfairly. Only about 9 per cent. of them are claiming the allowance.
It will be stated that many others are buying their houses on mortgages and that where a mortgage is payable an allowance is made for mortgage interest. It is quite true that an allowance is made for mortgage interest, but it is also true that the tax is still paid merely to be offset against liability which occurs under mortgage interest either to a building society or a bank.
The hon. Member for Kidderminster will forgive me for drawing attention to something Which I think may not have occurred even to his fertile mind, but it certainly is often forgotten that the great majority of owner-occupiers are occupying houses with a rateable value of not more than £ 40 or £ 50, and the great majority are in economic circumstances in which they have to be their own handymen and do their own painting and decorating and their own running repairs, because the cost of employing workmen at commercial rates is quite prohibitive for them.
I hope that the Chancellor will address his mind to this and will tell us: how does a man who does his own repairs charge for it to get the allowance? He does not charge for it, and the answer is that he does not claim at all. Only a few people are getting the relief to which they are technically entitled. To claim that a man is being fairly taxed when he is paying local taxation in the form of rates as well as Schedule A is stretching the hand of logic a long way, because the owner-occupier is even in a relatively unfavourable position compared with the landlord who owns domestic property as a commercial proposition. Where money is invested in property not for owner-occupation, according to my advice the landlord is able to offset rates and other charges on the property as running expenses on that property when he is being assessed for taxation.
4.30 p.m.
This state of the law, which places the owner-occupier at a disadvantage relatively to the landlord of property which is let out to rent, is a state of affairs which can no longer be rationally defended. I am fully aware that at this stage of the Finance Bill time is pressing because there are many others items to be dealt with, and I must come to the end of my general observations and say to the Chancellor that in view of the favourable statements which have been made by his predecessors on other occasions, and by many of his political supporters on public occasions outside the House, we ought to have a clear indication whether it is the Government's intention to deal with this problem by accepting the new Clause which my hon. Friends and I have placed on the Notice Paper,


or whether they intend to leave this bone of contention until a time when it is more politically convenient to them.
This may not be a strong debating point. I am concerned to keep to what I regard as the redress of an injustice, and if the right hon. and learned Gentleman and his colleagues in the Government think that they will play about with this issue for another two years in order to put a very nice juicy titbit in the shop window before the next General Election, we shall regard that as not very creditable. If the case is established, as I believe it has been established in general terms, for relieving taxpayers of this impost which affects about 6½ million people, it ought to be done now when we are trying to balance this matter, which has to be balanced with other priorities.
We have established a case for relief from this taxation. I freely admit that on former occasions it was suggested by my hon. Friends in the Labour Party that this relief ought to be limited to perhaps the first £ 15 or some such figure. But in asking for the support of hon. Members on both sides of the House, we feel that instead of trying to separate a few people who occupy larger premises from a general body of people in the smaller rated premises of £ 40 to £ 80 rateable value, we ought to go the whole hog and wipe out the tax altogether.
I hope that hon. Members will support the new Clause.

Mr. Nabarro: I rise to oppose the Clause. I divided the House against the Government on the abolition of Schedule A Income Tax on owner-occupied houses in 1960. I divided the House again against the Government in 1961 on exactly the same issue.

Sir William Robson Brown: My hon. Friend was not alone.

Mr. Nabarro: If my hon. Friend the Member for Esher (Sir W. Robson Brown) wishes to interrupt, I will give way to him.

Sir W. Robson Brown: I said that my hon. Friend was not alone.

Mr. Nabarro: But my hon. Friend was not with me on either of two occasions.
I am delighted that this year the Chancellor has agreed to do what I

asked him to do last year— to abolish Schedule A Income Tax outright on owner-occupied houses. He has abolished it outright in that it would be abolished on owner-occupied houses without any qualification as to annual value, although not outright in the sense of length of time. Those are different applications of the same word. I am happy that my right hon. and learned Friend has decided to implement abolition next year, and I shall support him in the Lobby this evening for a variety of what I conceive to be very logical reasons.
The first reason is that there are a large number of maintenance relief claims current and applicable in the present year which are based on a five-year average. I tried to put this point to my right hon. and learned Friend in the Budget debate last April. Many owner-occupiers have substantial sums in hand in respect of expenditure already incurred for the maintenance of their properties, which they are holding in order to maintain a maximum relief in their five-year average. It would be neither equitable, nor fair to abolish Schedule A Income Tax without due notice to those men and women, for they would largely be robbed of the preserves of their own diligence during the last few years in ordering and arranging their financial affairs in such a way as not to attract Schedule A Income Tax on their properties.
It is no good the hon. Member for Sowerby (Mr. Houghton) shaking his head. I am one of the select few in the nation. I have never paid a penny of Income Tax Schedule A in my life since I owned a house, which is a matter of sixteen years, because I am clever enough to arrange my financial affairs in such a way as not to attract any Schedule A Income Tax liability.
But there are very few people who can arrange their affairs in that way, because it is excessively complicated and excessively difficult, and I could not do it by myself. I employ a qualified accountant to do it for me, and the fees which he charges me for carrying out the computation to relieve me of Income Tax Schedule A are in due course charged against my maintenance relief claim, admitted by the Inland Revenue.
My right hon. and learned Friend in his benevolence therefore pays my accountant's fees for me.

Mr. J. T. Price: We all understand that the hon. Member is the most modest man in the House. But does he not realise that he is just indulging in a piece of specious special pleading to get out of the situation that last year he moved a new Clause, almost in identical terms with that which I have just read to the House, and now he is opposing it, for all kinds of tactical reasons which do not bear examination? He is not opposing it on a matter of principle.

Mr. Nabarro: We are no longer in Committee. I allowed the hon. Member to intervene, as he allowed me to intervene once. But the difference between our interventions is that mine was short and his was lengthy.
These are not specious reasons. So far I have quoted only one reason which prompts me to believe that abolition next year will be quite satisfactory. The second reason, which I believe is more powerful, concerns the rating revaluation of domestic hereditaments, in 1963, which is long overdue and, in my judgment, inescapable.
Hon. Members opposite who are honest with themselves and with their constituents know very well that rating revaluation has been deferred so long only because of the physical and clerical difficulties of carrying through a revaluation of domestic hereditaments in respect of about 13 million dwellings. It has not been done since 1936 and it has gravely unbalanced the whole rating structure. It is long overdue that it should be tackled and it is inescapable that it will lead to the doubling or more of revaluation for domestic dwelling-houses.
In these circumstances, I believe that it is not unreasonsable that my right hon. and learned Friend should cause to coincide as far as possible in the same financial year the increased rating valuation of domestic dwellings with partially offsetting against it the diminution in taxes paid on account of the withdrawal of Income Tax Schedule A. It is not an unreasonable proposition and the fact that it will be done in 1963, in the fourth

year of this Parliament, does not necessarily make it an electoral issue.
It has been suggested that the Chancellor rustled up a statement on the Budget that Schedule A would be abolished next year because of the result of the Orpington by-election. I think that that is nonsense. It would have been done, anyway. It may be a political decision, but not related to a by-election.

Mr. William Warbey: Only a General Election.

Mr. Nabarro: No, not a General Election, but inescapably there will be a General Election before 1964.
I thought that what was written inLloyds Bank Review,which reached me and every other hon. Member this morning, in the article "Some Reflections on the Budget", stressed and underlined the point which I am now endeavouring to make on Schedule A. It reads:
Mr. Lloyd indicated that he would have done something this year but for the fact that he was not prepared to forgo the tax involved, about £ 50 million, but he hoped to be able to exempt owner-occupied houses from income tax under Schedule A. It should be noted that as a development of fiscal law the proposal has nothing to commend it. It is purely a political decision to encourage house ownership.
That would be a very reasonable and not ungenerous interpretation of why my right hon. and learned Friend is doing it.
4.45 p.m.
The fact thatLloyds Bank Reviewhappens to coincide with my own philosophy in this matter is not a remarkable feature of what I am saying, because a few months before the Lloyds Bank Reviewwas published I wrote:
Politically, I believe there is a very strong case indeed for total abolition of the imposition of Income Tax Schedule A' on owner-occupiers. The Tory Party states, as a first article of its faith, the private ownership of houses and the creation of a property-owning democracy.' It is quite inimical to that philosophy, in my judgment, that the Chancellor of the Exchequer should continue to place this heavy tax, in the form of Income Tax Schedule A' on those thrifty and deserving citizens who, over the years, have put together enough money to buy their own homes, and who seek by all means to maintain them in good order and condition. That is why I shall persist in my efforts in the House of Commons to secure the removal of this iniquitous form of taxation".

Mr. Herbert Butler: Except today.

Mr. Nabarro: I wrote that last January and the Chancellor announced the abolition of Schedule A in his Budget speech. It will take effect, very properly in my judgment, next year and I am quite prepared next year to vote against the Chancellor if he does not do it. But this year he has made me the promise to do it and that, in my view, is adequate.

Mr. Warbey: The hon. Member keeps talking about the possibility of the Chancellor carrying out his promise next year. He knows very well that the Chancellor has made it quite clear that he will probably not carry out the promise in full next year, if he is still Chancellor.

Mr. Nabarro: Of course he will be.

Mr. Warbey: The Chancellor himself said that it is probable that he will have to make the reduction in stages. If, next year, the right hon. and learned Gentleman comes forward with only a partial reduction, will the hon. Member vote against it?

Mr. Nabarro: I do not believe that my right hon. and learned Friend has ever said that he intends to carry out this measure in stages. No doubt he will be answering in a few moments. He is listening carefully to me and making copious notes upon what I am saying. I am sorry to involve him in this additional, wearisome burden, but no doubt he will answer. I made my statement in the magazinePropertyin January this year. It was a precursor to the Chancellor's Budget statement.
I want to deal with the hon. Member for Westhoughton (Mr. J. T. Price). For a fancy piece of humbuggery I have rarely heard the equal in the House of the speech which he has just made. The hon. Member sat on the benches opposite in 1960 and again in 1961 and watched some of his colleagues going into the Lobby with me against the Government to vote for the abolition of Income Tax Schedule A. He uttered not a word in either debate.
The whole of the Labour Party, with the exception of one or two who had the gumption to oppose their own

Whips, abstained and remained quiescent. I will give the hon. Member the figures. I always do my homework first. On 22nd June, 1960, I was the first Teller in a Division against the Government. There were 19 Members voting against the Government— nine Tories, five Liberals and five Labour.

Mr. Wise: How many of those five Labour Members have been thrown out of the party since?

Mr. Nabarro: I do not think that any have been thrown out. I will read the roll of honour. They were the right hon. Member for Bassetlaw (Mr. Bellenger), the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), the hon. Member for Swindon (Mr. F. Noel-Baker), the hon. Member for Faversham (Mr. P. Wells) and, finally, the hon. Member for West Stirlingshire (Mr. W. Baxter). Yes, I am sorry, the last-named hon. Member has been chucked out, but he did pay his subscription, I understand.
The second vote against the Government on this same matter was on 20th June, 1961. On that occasion 17 Members voted against the Government. Again, I was the first Teller. There were 13 Tories, three Liberals, the other three Liberals were missing—

Mr. Wade: The hon. Member is getting on to rather dangerous ground. He will recollect that a few years ago he voted, either by design or by mistake, against a new Clause on this very subject moved by myself. He is well aware of that.

Mr. Nabarro: I will deal with that in a moment. The shadow Liberal Chancellor of the Exchequer should not be so impetuous. He has not done his homework.
As I was saying, on 20th June, 1961, 17 Members voted against-13 Tories, three Liberals, and the Labour roll of honour was a single Member, the hon. Member for Birmingham, Ladywood (Mr. V. Yates). What humbuggery it will be today if the whole Labour Party goes into the Lobby to support the abolition of Income Tax Schedule A.

Mr. J. T. Price: The hon. Member is simply trying to talk his way out of this.

Mr. Nabarro: What humbuggery it will be when the only Labour purpose will be to try to embarrass the Chancellor of the Exchequer.
I turn to the hon. Member for Huddersfield, West (Mr. Wade), the Liberal shadow Chancellor. In 1959, he moved a new Clause to the Finance Bill shortly before the General Election of that year. It will be recalled that the Chancellor in that year had reduced the standard rate of Income Tax by 9d. and in addition, as a special election gambit, had taken 2d. off a pint of beer.
Speaking in the debate on the new Clause moved by the hon. Member, I said that I would have preferred the £ 40 million loss of revenue from the 2d. off a pint of beer to have been applied to the abolition of Schedule A, but, as we had voted to take the 2d. off a pint of beer before that new Clause to abolish Schedule A could have been selected, it followed that I could not have the £ 40 million twice. As the 2d. had come off the pint of beer it could not be applied again three weeks later to abolition of Schedule A.
The hon. Member has flogged that dead donkey for so long. He has written about it four times inLiberal Newsand sent to the Liberal candidate in Kidderminster saying, Attack your Member on this". Now he seeks to rob my Tory friend the Chancellor of the credit justly due to him for his enterprising and objective measure in abolishing Income Tax Schedule A, which may well redress the balance of Orpington, in the longer term. It will certainly have important political implications as well as being just. For these good reasons, and with the eye of the Patronage Secretary upon me, I shall go into the Lobby this afternoon with my right hon. and learned Friend.

Mr. Wade: I do not propose to follow the hon. Member for Kidderminster (Mr. Nabarro) as he wrestles with his conscience, or perhaps hopes for the future.

Mr. J. T. Price: Or just wrestles.

Mr. Wade: Or perhaps merely wrestles.
Mr. Speaker indicated that the new Clause "Abolition of Schedule A

Income Tax" may be discussed with the new Clause which is before the House. Before referring to it, I make a brief comment about the Budget statement of the Chancellor. There seems to be a growing practice on the part of Chancellors of the Exchequer, when introducing a somewhat dull or unpopular Budget, to make forecasts about possible reliefs to be granted next year or in years to come. I am not sure that this policy of mortgaging the future is very wise. In the first place, there is no certainty that it will be the same Chancellor next year or that the promise will be carried out. Furthermore, long before the relief is granted those likely to benefit from it have probably discounted any benefits they will receive. I shall not pursue that further, but merely make that observation by way of preface.
I think that I have taken part in all the debates on Schedule A in recent years. I have heard the Treasury case for maintaining this tax put year by year and I have heard it supported by that vigorous upholder of the Establishment in the realm of taxation. I am referring to the hon. Member for Sowerby (Mr. Houghton), who, no doubt, will regard it as a compliment that I refer to him as an upholder of the Establishment. It now looks as if Schedule A is on its way out. Whether those who have spoken in favour of it and those who have voted against its abolition will now fight a rearguard action to maintain it, remains to be seen. I appreciate that there are reasonable arguments in favour of this tax, but none of those arguments affects my conviction that it is a tax which might well be dispensed with.
Reference bas been made to the speech of the Chancellor in the debate last year. I recollect that speech very well. I have already quoted from it, but perhaps I can help the hon. Member for Westhoughton (Mr. J. T. Price) in one respect. I agree with him that the Chancellor did not make a clear pronouncement. I think that it would be a fair summary of what he said to say that he considered it inappropriate to reach any decision or even to debate the matter until 1963 when Parliament will be faced with the problem of new valuations. I think that that is a fair summary of what he said on 20th June,


last year, as reported in column 1356 of HANSARD. Apparently for reasons which can we can only surmise, the Chancellor has had second thoughts.

Mr. J. T. Price: I am obliged to the hon. Member for making something clear which I failed to make clear when I was addressing the House a short time ago. I intended to say, but perhaps I did not say it in the best form of words, that the Chancellor did not make any clear statement. I may have said that he did not make any statement at all, but I agree that he made that statement. It was so unclear, indefinite and inconclusive, however, that I did not regard it as meaning anything at all.

Mr. Selwyn Lloyd: On the question of clarity, I should point out that I said:
I would have thought that the proper course would be to deal with the matter in connection with the 1963 revaluation."— [OFFICIAL REPORT, 20th June, 1961; Vol. 642, c. 1356.]
I think that was specific.

Mr. Wade: I do not want to argue this at great length. The Chancellor said:
We shall require special legislation in the Finance Bill of that year to empower us to use the new valuations for Schedule A purposes, because the present Rating and Valuation Bill empowers us to use them only for rating purposes. We shall require legislation in the Finance Bill to allow us to use them for Schedule A purposes, and that is the time to have a debate on this matter. We shall then know the actual figures on current values."— [OFFICIAL REPORT, 20th June, 1961; Vol. 642, c. 1356.]
I think it a fair summary to say that he thought it preferable to wait until 1963, but apparently there have been some second thoughts and he has now indicated that it is his intention to remove Schedule A either wholly or in part, to reduce or to abolish it.
I do not think that the Government's policy on this subject is very clear or consistent. All we appear to know is that at some time in the future the Government are to repeal this tax in whole or in part. Therefore, it would not serve a very useful purpose to go over the whole ground again, the objections to taxing "notional income" and the many anomalies that arise therefrom. I merely repeat my criticism of Schedule A that it is antiquated, illogical

and administratively wasteful. It is wasteful in time and money both for those who collect it and those who are called upon to pay it.
The practical question now, however, is whether it should be abandoned completely or only in part. When I say completely, I mean on all property and regardless of the amount of the assessment. I must make it clear that I am a total abolitionist concerning this tax. I mean by that the tax on all property, partly because of the anomalies and partly because I think its abolition would go some way towards a simplification of our taxation. It is true that several years ago I moved a new Clause on similar lines to that which has now been moved from the Opposition benches, but I regarded that as a first step and I have always advocated total abolition.

Mr. Philip N. Hocking: Does the hon. Member mean on commercial property as well?

Mr. Wade: If the hon. Member will bear with me, he will find that I am about to deal precisely with that point because I think that there is some misunderstanding. I recognise that those who advocate the complete scrapping of Schedule A tax must justify this course and that I Shall endeavour to do. One has to consider what it will involve and who will be affected. Broadly, there are three classes of taxpayers who suffer Schedule A. First, there are the owner-occupiers of business premises. That concerns the point just raised by the hon. Member for Coventry, South (Mr. Hocking). They receive the annual demand for Schedule A based on the net annual value, but when computing income for Schedule D purposes they are entitled to show the Schedule A payment as an expense. Therefore, if Schedule A were abolished it would merely have the effect of increasing the Schedule D liability.
I calculate that the net amount of tax will remain the same unless, perhaps, the business is running at a loss. I am not sure that it is altogether fair that a man should pay on notional income when his business is running at a loss. Broadly speaking, if Schedule A tax is abolished, the position will be the same.
5.0 p.m.
The second class is the landlord, He suffers tax on income from rents partly


under Schedule A and partly under Schedule D. He is liable under Schedule D under the heading of excess rents. I have deliberately included in the new Clause to which I am speaking a reference to Sections 175 and 176 of the Income Tax Act, 1952 in order to make clear that, in my view, the landlord will continue to be liable for tax on rents notwithstanding the abolition of Schedule A tax. In other words, the abolition of Schedule A will not relieve the landlord from tax in respect of rents. It might even bring in some additional revenue.
At present, the landlord has the advantage of the statutory allowance even if he spends nothing on repairs. One consequence of the Rent Act is that the amount of statutory allowance has been increased. For the good landlord. this makes no difference. The good landlord will spend more than enough to provide a set-off against his Schedule A liability. The bad landlord who spends nothing at all on maintenance and repairs gains. It may well be that, under the present system, the Treasury is losing money compared with what would happen if Schedule A tax were abolished.
There are other relevant circumstances. For example, a landlord may form a company and transfer the property to the company, paying himself for managing the property. In this case, the remuneration may cancel out altogether both the Schedule A liability and the Schedule D liability, but he will then have to pay under Schedule E. I stress this because I wish to make clear that, in one way or another, rents are taxed. Similarly, I do not think that there will be any gain for the large property-owning company if Schedule A tax is abolished. It is possible that the large property-owning company may even lose as a result of the abolition of the statutory allowance. I think that we may dismiss the question of the business owner-occupier, the property-owning company and the individual landlord.
The third category is the residential owner-occupier. These are the people primarily affected. As the hon. Member for Kidderminster has pointed out, not of all them pay. I suggest that those who do pay fall into four classes. First, there are those who through sheer ignorance of their rights or reluctance to fill up

forms pay although they need not do so. I do not know how many there are. I think that there are a good many, in spite of the publicity which has been given to ways of relieving oneself from liability.
Secondly, there are those whose liability is very small, who feel that it is not worth the trouble, who do not understand the making of a maintenance claim and who do not think it worth the expense of obtaining professional advice.
Thirdly, there are those who cannot afford any substantial expenditure on repairs and decorations sufficient to offset their Schedule A liability. For instance, newly-married couples who have saved up enough to buy a house, perhaps a new house, may not be able to spend much during the first five years. Older people who have saved up enough to buy a house on retirement may not be able to spend much on the house itself once they have bought it. I do not know how many come into this category, though I think that there are more than the hon. Member for Kidderminster realises.
Lastly, there are the "do-it-yourself" owner-occupiers, those who carry out their own repairs, painting and decorating. As hon. Members know, if an owner does the work himself, he may not include the cost of the work done in his claim for maintenance allowance.

Mr. Nabarro: That is quite wrong. He may not include the cost of his own labour, but he may include the cost of the materials used and the tools. The way lie gets round the labour problem is to employ his wife to do it for him and charge it to him, the income derived therefrom being then assessed under Schedule D or Schedule E, as the case may be. The hon. Gentleman should know that.

Mr. Wade: I had precisely that point in mind, though I must say that I think that what the hon. Gentleman is suggesting would by the general public be called a wangle.

Mr. Nabarro: On a point of order, Mr. Deputy-Speaker. Would you cause the hon. Member to withdraw the allegation that I am a wangler? What I have said is clearly laid out as instructions, with the blessing of the Treasury, in a document entitled, "Income Tax— Schedule A", issued by the Board of


Inland Revenue, No. 99A. Will the hon. Gentleman now withdraw the allegation that I am a wangler?

Mr. Wade: Is the hon. Gentleman suggesting that the husband should carry out the work himself and then make a statement to the Revenue that the work has been done by his wife?

Mr. Nabarro: Certainly not. I never tell the Inland Revenue falsehoods. That is the first tenet of my faith. The hon. Gentleman did not listen. The owner of the house gets his wife to do the work and submit an invoice to him. If the wife is the owner, she employs her husband to do the work and the husband submits an invoice to the wife. That is how the matter is dealt with.

Mr. Douglas Houghton: Suppose the wife cannot paint.

Mr. Nabarro: That has nothing to do with it.

Mr. Wade: I think that we might go on with this indefinitely.

Mr. Nabarro: Will the hon. Gentleman withdraw "wangle"?

Mr. Wade: I do not think that it is an unparliamentary word.

Mr. Nabarro: Of course—

Mr. Deputy-Speaker (Sir William Anstruther-Gray): Order. The word which I heard used was used in debate. Lt is not unparliamentary to use that word in general debate.

Mr. Wade: I am much obliged, Mr. Deputy-Speaker.
I do not wish to detain the House much longer on the subject of husband and wife, but this is an important aspect of the matter. The present state of affairs is anomalous and certain aspects of it are an encouragement to the clever boys— I am not specifying who the clever boys are—

Mr. J. T. Price: The "wide" boys.

Mr. Wade: I am not referring to the hon. Member for Kidderminster. I am referring to "wide" boys in general. I know that there are some husbands who are not prepared to sit back and make their wives do the painting and decorating merely in order to gain a little on tax.
The position may be summarised as follows. Those who pay the tax are, mainly, those who are ignorant of the law and the least well off among owner-occupiers, newly-weds and others who cannot afford to spend a great deal to cover their maintenance allowance, and the "do-it-yourself" owners.

Mr. Houghton: The hon. Gentleman must not overlook the very large number of owner-occupiers who pay no Income Tax at all because they have wives and children and their allowances exceed their taxable liabilities. There are very many people who are not interested in Schedule A, maintenance claims, or anything else.

Mr. Wade: There are, nevertheless, many people with comparatively modest means who do, in fact, pay tax under Schedule A.
Two paints emerge. First, it is primarily the owner-occupiers who suffer from the tax, and, if we were to abolish it altogether, it would be primarily owner-occupiers— not all of them, but some— who would benefit. Secondly, partial removal, whatever scheme one may think up, would, in my opinion, introduce new anomalies perhaps as great as those which now exist.
I therefore think that the proper course to take is to make a clean sweep of this tax altogether. After all, it is an antiquated tax. When Addington's Property and Income Tax Act, 1803, was put on the Statute Book, circumstances were very different. One of the main sources of income was income from property. This is not so today. Times have changed. I admit that one of the arguments of substance against this proposition is that we might not be fair to those who rent property.
Last year, in the debate, I suggested that a partial answer to that would be to grant relief on the first £ 15 or £ 25 of all invested income, but that is not a complete answer. I recognise that when a Chancellor introduces some relief it is always possible for someone to say, "This is not absolutely fair. Everyone is not being treated equitably." This is one of the occupational hazards of Chancellors of the Exchequer, but I do not think that it is sufficient to lead one to oppose the abolition of this tax.
I have not said very much about the new Clause which has been moved by the hon. Member for Westhoughton. In my view, it is only a step, but I would be prepared to support and vote for it only as a step towards total abolition. After all, we have heard all the arguments that can be deployed one way or the other. The issue is clear, and we ought to be able to make up our minds by now. The issue is whether we are in favour of abolition or not, and I am in favour of abolition.

5.15 p.m.

Mr. Warbey: I wish to speak in support of the new Clause "Rent Allowance", standing in my name and the names of other hon. Members, proposing an Income Tax relief in respect of amount; paid in rent. Before I do so, I should like to say a few words about the new Clause which has been moved by my hon. Friend the Member for Westhoughton (Mr. J. T. Price) and the discussion which has taken place so far on it. I do so because, in my submission, the principles underlying the case for the concession in regard to Schedule A apply equally in regard to persons who are paying rent.
The hon. Member for Kidderminster (Mr. Nabarro) made a valiant attempt to brazen away the illogical and hypocritical position in which he has placed himself this year, and in which the Chancellor of the Exchequer is placed by refusing to accept the new Clause. The hon. Member for Kidderminster knows, in the first place, that the Chancellor, in his Budget speech, gave a very specific pledge to get rid of this Schedule A tax in due course. He knows, secondly, that the Chancellor did not give a pledge to abolish it outright next year, but indicated that he will probably abolish it by stages. Nevertheless, the hon. Member for Kidderminster, who, apparently, no longer finds it profitable to make attacks on his own Front Bench, possibly in view of the imminence of a General Election, is finding all kinds of very poor reasons indeed for justifying the position in which the Chancellor has landed him.
The Chancellor has to provide a good and sufficient reason for saying why it is to be possible to abolish or reduce this tax next year when it is not possible

to do it this year. The hon. Member for Kidderminster produced a quite fantastic argument about people who make arrangements to gain relief from this tax by means of the five-year assessment of their payments for repairs and maintenance. He knows very well, of course, that the giving of one year's notice will make very little difference to this position. He did not think about it last year when he went into the Division Lobby in support of his own proposal.
One year's notice makes very little difference to the position, which has to be established over five years. To deal with that position completely, one has to give five years' notice. In any case, there is no reason at all why, when this tax is abolished for the future, it should not still be possible— in fact, I think it should be eminently reasonable— to enable persons who have delayed their claims for relief under Schedule A for refunds of Schedule A payments under the five year arrangements still to be able to make claims for the refund of the tax they paid in previous years. Therefore, there is nothing whatever in the hon. Member's argument on that score.

Mr. Nabarro: When I see the terms of the Chancellor's legislation next year. I shall move the appropriate Amendments relating to the terminal allowances, which is the proper and technical description of what the hon. Gentleman is expressing in lay terms.

Mr. Warbey: In other words, there is no difficulty about this problem at all, and no reason why it should not be dealt with this year rather than wait until next year. There is no reason whatever for giving people advance notice of the abolition of this tax.
The next argument advanced by the Chancellor and supported by the hon. Member for Kidderminster is that it is desirable to co-ordinate the abolition or reduction of Schedule A with the timing of the revaluation for rating purposes. The Chancellor has already admitted that the assessment for Schedule A purposes is not pegged to the assessment for rating purposes. There is no reason to link the two together, or why he should not make a change at any time he likes.
There is no reason for waiting until next year for that purpose.
Therefore, we are left with the only supposition which is possible— that the reason both for making the change and for deferring the time of the change is political, and I say that without any sense of criticism, because my own reason for changing my attitude to this question of the abolition of Schedule A tax is political in the broadest sense of the term. In other words, I accept the arguments of the hon. Member for Kidderminster and of my hon. Friend the Member for Sowerby(Mr. Houghton) that in logic there is no case for abolishing this tax purely on fiscal grounds.
Here I must venture to disagree with my hon. Friend the Member for Westhoughton, because it appears to me to be completely sound sense to say that persons who own houses are enjoying not merely a notional income, but a practical addition to their income as a result of the fact that they are not having to pay rent, and, therefore, are gaining an addition to their disposable income.

Mr. J. T. Price: If my hon. Friend does not see the logical fallacy in his reasoning, will he explain to the House how he would deal with a person who invests money in a motor car and does not pay bus fares, but enjoys the amenities of a motor car; or a person who invests money in a very expensive fur coat for his wife, or some other elegant article of value? Would he explain how any sort of fiscal argument exists there? Surely it is purely a matter of common sense.

Mr. Warbey: In the last resort one knows that fiscal arguments are commonsense arguments. They answer themselves. Here we must compare the situation of two broad classes of persons— persons who are living in houses which they have bought and persons who are living in houses for which they pay rent. The disposable income of a person living in a house which he has bought is larger than the diposable income of a person living in a house for which he pays rent. Therefore, that additional disposable income is properly the subject of taxation in relation to the person who has to

pay rent. I stress the words, "in relation to the person who has to pay rent".
This brings me to my own new Clause, "Rent allowance". The basic case for abolishing Schedule A is that under present social and economic conditions, to a large extent created by the present Government, the cost of providing a roof over one's head for oneself and one's family, whether one does it by means of buying a house or renting a house, has become intolerably high for the majority of people. We all know that it has become much too high. We all know why it has become much too high. It has become much too high as a result of the activities of money lenders, property owners, property syndicates, speculative builders, and landlords, who have all been encouraged in their activities by the policies of the Government.
The Government, through their Rent Act, deliberately encouraged the increase in the general level of rents. Through the creeping decontrol which has been allowed under the Rent Act, the Government are progressively removing any protection that hitherto existed against extortionate rents. By their general economic policy the Government have encouraged excessively high interest rates, and have, therefore, deliberately contributed to the high cost of mortgages and to the high cost of building new houses, and, therefore, to the high level of rents.
These are matters of Government policy. They have created an intolerable situation for large numbers of people. The house owner who is buying his house on a mortgage has to pay on the average about £ 4 10s. to £ 5 10s. a week in mortgage repayments, comprising repayment of capital and interest. On 1st April theObservergave figures to show how these rates had risen. Taking the London area, for a typical three-bedroomed house the monthly repayments in the last quarter of 1959 were £ 16 16s. In the last quarter of 1961 they had risen to £ 22 9s. a month. This was taking the rate of interest on mortgage repayments at 5½ per cent. In the meantime, the average interest charge on building society or local authority loans has risen to 6½ per cent. or 6¾ per cent. or even 7 per cent. Therefore, in practice many people in the London area have to pay about


£ 5 10s. a week to provide a house for themselves and their families.
Some hon. Members opposite might not consider that to be an unreasonable sum. Whether or not it is reasonable depends on the total income of the household. I remember that in my young days there used to be books of advice available to married couples on how they should conduct their affairs, how they should draw up their household budgets, and the amount that they should set aside to spend on rent. The advice given in those books was that it was not reasonable to spend on rent more than about one-sixth of one's income.
At present, there are some countries in which rents are considered to be unreasonable if they exceed one-tenth of a person's income. In this country we have gradually adopted new and more extortionate standards. When the subject is discussed nowadays it is common to talk about people paying one-quarter of their income in rent. In practice, many people have to pay as much as one-third of their income in rent. This is fantastic and intolerable and something must be done to redress the situation.
If one took the more reasonable standard of one-sixth of income, it would mean that, in practice, nobody ought to undertake the liability of home ownership, unless he had an income of at least £ 27 a week. If he lived in the London area, he ought to have an income of at least £ 33 a week. How many people have an income in excess of £ 33 a week? The answer is about 10 per cent. of the population. What are the other nine-tenths expected to do? They are expected to look for rented accommodation. What happens when they try to get rented accommodation? As a result of the operation of the Rent Act, rented accommodation has gone up tremendously in value.
My hon. Friend the Member for Salford, East (Mr. Frank Allaun), who is unable to take part in this debate, was kind enough to supply me with some figures for typical low-standard property in the Salford area. These are houses which have none of the standard amenities or which lack most of them. They are without baths, have outside toilets

or sometimes shared toilets, and probably do not even provide a proper roof over one's head because it leaks.
5.30 p.m.
Prior to the Rent Act, the average rent of these houses was 9s. 6d. a week. After that Act came into force, the permitted rents went up to 19s. a week. Gradually, even these houses are becoming decontrolled as the present tenants either leave them or die. Then the landlords are able to raise the rents to a much higher level. The rent of a typical decontrolled house of this character is 50s. In other words, the rent has quintupled as a result of the Rent Act introduced by the Chief Secretary to the Treasury, who was responsible for the fantastic statement that people who could not afford to pay the high rents charged in big cities should go outside them and find somewhere on the outskirts to live. I wonder what advice the right hon. Gentleman would give to people living in the London area who find that they cannot find anywhere tolerable for a family to live in for 50s. a week, or even 60s. or 70s. They are lucky if they can get a place to live in for £ 5 or £ 6 a week.
According to last October's figures, the average income of a male worker is still only £ 15 6s. 10d. a week. Sixty per cent. of the male workers do not get as much as the average income. In other words, about two-thirds of the male householders are earning less than £ 15 a week, yet the majority of them are being called upon to pay rents substantially in excess of one-fifth or even one-quarter of their income.
The situation of people in council houses is not very much better. It will gradually get worse under the Government, because their policy is to encourage councils gradually to increase their rents to the economic cost of the provision of a new council house. As a result of the Government's policy of high interest rates and of allowing land prices to rise to fantastic levels, the average cost of the weekly repayment on a three-bedroom council house is £ 3 5s. a week. By any reasonable standard— and the standard which I take is one-sixth of one's income for rent— that means that no one is in a position to pay the economic rent of a present-day council house unless he has an income of at least


£ 1,000 a year, which the majority of people do not have, or anything like it.
Finally, I wish to deal with the situation of women householders, of whom there is a considerable number. I said earlier that the average weekly earnings of the male worker are £ 15 6s. 10d. a week, according to the last census in October, 1961. At the same date, the average earnings of women workers were £ 7 14s. 6d. a week. It is fantastic how we still exploit the women workers. This £ 7 14s. 6d. is for full-time work and is not very much more than half the average weekly earnings of male workers.
The other day a widow drawing the widow's pension of 10s. a week came to my "surgery", in my constituency. She was a full-time worker in a factory canteen drawing a wage of £ 5 2s. a week. Therefore, her total income was £ 5 12s. Out of this she had to pay rent of 22s. a week. After paying the insurance contribution and Income Tax, she is left with £ 4 a week for all her necessities of life. She came to me to complain not that she was being exploited by the factory owners in whose canteen she was employed, in that she was receiving just over £ 5 a week for doing a full week's work, but that she had to pay 2s. a week Income Tax.

Mr. Deputy-Speaker: Order. The hon. Gentleman is straying rather far from the new Clause.

Mr. Warbey: I was led into going beyond the scope of the new Clause, Mr. Deputy-Speaker, but I am coming to the point of the proposed new Clauses.
This woman complained not that she had to pay 22s. a week for the two or three rooms in which she lived, but that she had to pay Income Tax. It is intolerable that a woman in those circumstances should have to pay Income Tax. It is intolerable that people with even larger incomes paying larger rents should have to pay the amounts of Income Tax which they pay.
The time has come to apply to Income Tax the principle which we apply to claims which can be made under the Legal Aid and Advice Act. Under that Measure, people obtain a financial contribution to their legal costs if they can show that their net disposable income

is below a certain figure. In the calculation of that net disposable income, rent and mortgage repayments are deducted from the total income. This is a proper way of assessing a person's ability to pay.
In assessing a man's ability to pay Income Tax, we should also take account of what he has to pay in mortgage repayments or in rent. This is a perfectly reasonable proposition, which, perhaps, would not be necessary in a well-ordered society, namely, in the society in which there was reasonable equality in the general level of incomes and in which the cost of providing a roof over one's head was restricted to a reasonable proposition of one's income. Neither of those conditions holds good in our present society.
The cost of providing the most basic necessity of life second to bread, namely, shelter, is being determined as a result of the policy of right hon. Gentlemen opposite by the higgling of the market. So long as those are the conditions under which people are compelled to provide house room for their families, the moneylenders, speculators, landlords, property syndicates, and so on, should make a contribution through the taxes which they pay to relieving the tax liability of the people who are enduring these intolerable conditions.

Mr. Selwyn Lloyd: There have been many debates in the past on Schedule A, and we have had a fairly lengthy recapitulation of one or two of them this afternoon. I shall not go into the general reasons against making a concession on Schedule A in respect of owner-occupied residential property. I set them out last year without endorsing them. I made it quite clear then that I thought this was a matter to be dealt with in connection with the 1963 revaluations, and I pointed out in Committee last year that legislation would be required to enable the new valuations to be used for Schedule A purposes.
I think that I made the Government's intentions quite clear in the course of my Budget speech. I will quote what I said then.
Therefore, although I intend that this matter shall be dealt with in the 1963 Finance Bill, as I have said before, it is right to say this now. We will not seek to use the new rating valuations for Schedule A purposes so


far as these owner-occupiers of residential property are concerned. On the contrary, for the reasons which I have set out, we will make proposals for bringing this tax on them to an end. I cannot say now whether this will be done in a single operation in one year. It will mean giving up about £ 50 million a year. Whether we can manage to get to that position in one year will depend on revenue considerations. But Schedule A for owner-occupiers of residential property will go."— [OFFICIAL REPORT, 9th April, 1962; Vol. 657, c. 978.]
The reasons for that decision were these. I think that it is generally accepted that pre-war values have greatly increased and that Schedule A, on current values, would involve much too heavy a burden. The point about maintenance expenses was raised by my hon. Friend, but I think that basically the view expressed by the hon. Member for Westhoughton (Mr. J. T. Price) was that a social purpose would be served in giving this assistance to the owner-occupier; the social ground was the reason for the proposal. I do not think that assisting owner-occupation in this way necessarily involves the implication, as suggested by the hon. Member for Ashfield (Mr. Warbey), that it should also apply to an ordinary domestic outgoing like rent.
It has been said that, the decision having been announced that this tax is to be brought to an end, why not do so this year? In the speech to which I referred in June, 1961, I made it perfectly clear that we were not going to do it this year. The reason, of course, is one of priorities, and also the fact that the hon. Gentleman's new Clause would cost £ 34 million this year rising to something under £ 50 million in a full year, which is very much the same as the cost of the new Clause of the hon. Member for Huddersfield, West (Mr. Wade), and, in addition, the new Clause of the hon. Member for Ashfield would cost a further £ 100 million a year. Therefore, on the ground of cost and priority it is not possible for this to be done this year.
It has been said that if the Government are not going to do it this year. why give notice of it? I think that that was a fair thing to do. I do not think that it can be described as electioneering. If one had been electioneering I think that one could have saved it up. I made clear that we were not going to use the new rating valuations. It was

right to make that clear. I think that it is necessary to make some further clarifications, because there are people who have to consider appealing against their assessments. I think it was right to remove the impression given by the hon. Member for Westhoughton that we had not said when we were going to get rid of this tax. I am grateful for the way in which he put the case, because it enables me to make clear that it is out intention to bring this tax to an end.

Mr. Nabarro: Mr. Nabarro:Jolly good.

Mr. Lloyd: The third point was that there were very considerable administrative complications which required a certain amount of discussion and planning. I think uncertainty would be a very bad background for that discussion and planning. I think that it is much better against a clear declaration of intent. There is the further point, that the whole code of taxation of rents and other income from real property will also have to be reviewed at the same time. I think that it is better to have that review against a clear statement of intention. That is the Government's position. I have promised that we would legislate.
5.45 p.m.
The question of timing and whether the tax should go in one year is a matter for further consideration. The question of costs and administrative difficulties must enter into the calculations, but there are obvious advantages in doing it as soon as possible in one bite.

Mr. Callaghan: There is still some dubiety in my mind [Interruption.] The hon. Member for Kidderminster (Mr. Nabarro) made a long speech and expressed himself very fully. Perhaps he would allow me to speak without interruption.
Is Schedule A as a whole to be abolished, or is the Chancellor going to exempt the owner-occupier? Is he to make assessments of property and exempt that property occupied by owners, or is the whole process of assessment to disappear whether the property is occupied by its owner or not?

Mr. Lloyd: I have said that it is for the owner-occupier of residential property that the tax would go. I also said that the code of taxation of rents and other incomes from real property


would also have to be reviewed. Therefore, I am not in a position today to answer the hon. Gentleman's question. It may be and it may not be. It is a matter which will have to be very much considered in relation to Schedule A owner-occupiers. It is very much better for us to consider that against the background of a clear statement of indication that we are doing away with the tax on the owner-occupier. There is obviously an advantage in doing that as soon as possible and in one bite.
I will not say more now than that there will be legislation to bring this tax finally to an end. It will be a complete end of the tax for the owner-occupier of residential property. Whether that can be done in one year or not, I am not able to say. Whether we can get to that position in one year will depend mainly on revenue considerations. I do not think that the administrative complications would necessarily be decisive, although there are administrative complications. That is the clear intention of the Government.
So far as this year is concerned, and as I stated quite clearly last year, on the grounds of expense and priorities I cannot accept the new Clause.

Mr. Callaghan: I am obliged to the Chancellor for answering my question. There is an important decision to be taken now, as to whether this taxation is to disappear. He has a choice that he can make. He can go on levying assessments and exempt the man who occupies his own house, or he can abolish the tax altogether. As I understand him, he has not made up his mind. The Chancellor seems to be a little anxious to get this point quite clear. Let me, on his behalf, say that it makes no difference to his intention to rid the Schedule A owner-occupier of the payment of this tax. I say that readily for him because he is so anxious that it should be said. I repeat that whatever the Chancellor decides to do he can, of course, exempt the Schedule A owner-occupier. But I ask him to think very carefully before he gets rid of the structure of the Schedule A tax. It has a great many advantages which he may want to use for a number of purposes in the future. In saying that, let me repeat once again that

it is possible to preserve the structure of the tax but to exempt the owner-occupier. I do not want to see the baby thrown away with the bath water.
In pursuing his objective, I ask the Chancellor to consider whether he ought not to retain the structure of the tax itself. As my hon. Friend the Member for Ashfield, Mr. Warbey, said, there is no logical fiscal reason for the abolition of this system of taxation. The Chancellor can choose, as a political matter— as he has done— to exempt a certain number of people from payment of it, and it is within his power and that of the House to decide that certain groups of taxpayers should not pay it. But to destroy the structure of the tax itself, as distinct from exempting owner-occupiers, would lead us along a fiscal path which any Chancellor should be careful of treading.
I want to make it quite clear that, in a matter of taxation of income from all sources, whether notional or not, a Chancellor should think carefully before he destroys the structure of the tax. That is quite different, however, from exempting certain groups, which he has said that he intends to do. I am glad to hear that he has not decided at this stage to throw the structure of the tax away, and I hope that he will bring us some very convincing reasons if he decides to abolish it altogether.
He may say eventually that what would be left would be such small beer in relation to the owner occupier's position that he would be right in getting rid of the tax altogether and abolishing the whole structure. But he or his successors might regret that if he did, because they might have found it useful for quite different purposes for levying taxation in future.
My hon. Friends have speculated on the reason why the right hon. and learned Gentleman has announced this decision now. Of course, we understand that it was not for any purpose connected with by-elections. He has told us so, and after all it was in any case so unsuccessful that he would not want to claim that he had done it for that purpose, since it brought him no return except that of my hon. Friend the Member for Middlesbrough West (Dr. Bray) to this House.
I have discussed the reason for the introduction of the speculative gains tax. It means that all those accountants who have been servicing the hon. Member for Kidderminster (Mr. Nabarro) on his maintenance claims are not likely to lose his custom. Now that the new tax has been instituted the hon. Member will be able to retain their services. They will be able to advise him on how to avoid the capital gains tax, and I am sure that he will have another very substantial field in which to exercise his ingenuity in avoiding the payment of his taxation. That is about the best reason I have heard so far for the speculative gains tax, which has no other significance— certainly not from the revenue or social points of view.
I thought that the right hon. and learned Gentleman's argument for not abolishing the Schedule A tax this year was a little difficult to understand. He is raising £ 50 million on lollipops in a full year. He is to carry out his decision on Schedule A by instalments, and he has a margin of taxation in hand. As we all know, on 1st January next he is divesting himself of about £ 83 million of revenue that he would otherwise have got from the Surtax payers, and the Schedule A taxpayer can quite easily understand that his turn in the queue might have come much earlier if the Chancellor had not preferred Mayfair to Orpington. But because he did prefer Mayfair to Orpington, he rid the Surtax payers of their liability and then, in response to the despairing cry from Orpington. decided that the Schedule A taxpayers had better come next.
When the right hon. and learned Gentleman talks of priorities, let us be quite clear about what he means. His priorities are the Surtax payers and the limited companies, and then he descends to the smaller P.A.Y.E. taxpayer, who is last in the queue. But, of course, as we get nearer the General Election the P.A.Y.E. taxpayer will be raised higher in the queue.

Later, I shall be producing more evidence to show how the P.A.Y.E. taxpayer has been penalised by sucessive Chancellors in the last ten years. The right hon. and learned Gentleman has thrown a sop to a group of them to indicate that they may get something better before the election. I am sure that he will keep his promise to rid them of some part of this tax. But if he introduces his proposals in the next Finance Bill, the relief cannot become effective until the 1st January, 1964. No one will have a penny of relief before then. Indeed, they may not get much then. That will depend on what else the Chancellor has to do.

In view of the combination of circumstances, it is difficult to rid our minds— no matter what the Chancellor may know to be the truth of the matters— of the suspicion that he has done this purely for electoral reasons because the fortunes of the Government were taking such a battering during the by-elections. I do not think that he will succeed. I think the Government are on their way out in any case and that the people are in the mood to regard bribes as bribes and not to accept them any longer. I do not believe this will affect their considerations of the general record of the Government.

The Chancellor mistakes the mood and temper of the people if he believes— he says he does not believe it— that a bribe of this sort is likely to recover the fortunes of the Conservative Party. The malaise of the Conservative Party goes far deeper than the abolition or promise of aboliton of Schedule A. He might just as well have given the taxpayers the penny now as well as the bun, have accepted our Clause and so have gone on with the task this year.

Question put,That the Clause be read a Second time:—

The House divided:Ayes 195, Noes 250.

Division No. 230.]
AYES
[5.57 p.m.


Abse, Leo
Bence, Cyril
Bowles, Frank


Ainsley, William
Bennett, J. (Glasgow, Bridgeton)
Boyden, James


Albu, Austen
Benson, Sir George
Braddock, Mrs. E. M.


Allaun, Frank (Salford, E.)
Blackburn, F.
Bray, Dr. Jeremy


Allen, Scholefield (Crewe)
Blyton, William
Brockway, A. Fenner


Awbery, Stan
Boardman, H.
Brown, Rt. Hon. George (Belper)


Bacon, Miss Alice
Bowden, Rt. Hn. H.W. (Leics.S.W.)
Brown, Thomas (Ince)


Baxter, William (Stirlingshire, W.)
Bowen, Roderic (Cardigan)
Butler, Herbert (Hackney, C.)




Butler, Mrs. Joyce (Wood Green)
Hynd, John (Attercliffe)
Popplewell, Ernest


Callaghan, James
Irving, Sydney (Dartford)
Prentice, R. E.


Chapman, Donald
Janner, Sir Barnett
Price, J. T. (Westhoughton)


Cliffe, Michael
Jay, Rt. Hon. Douglas
Proctor, W. T.


Collick, Percy
Jeger, George
Pursey, Cmdr. Harry


Craddock, George (Bradford, S.)
Jenkins, Roy (Stechford)
Randall, Harry


Cronln, John
Johnson, Carol (Lewisham, S.)
Rankin, John


Croaland, Anthony
Jones, Dan (Burnley)
Reid, William


Cullen, Mrs. Alice
Jones, Elwyn (West Ham, S.)
Rhodes, H.


Dalyell, Tam
Jones, Jack (Rotherham)
Roberts, Albert (Normanton)


Darling, George
Jones, J. Idwal (Wrexham)
Robertson, John (Paisley)


Davies, G. Elfed (Rhondda, E.)
Jones, T. W. (Merioneth)
Robinson, Kenneth (St. Pancras, N.)


Davies, Ifor (Gower)
Kelley, Richard
Ross, William


Deer, George
Key, Rt. Hon. C. W.
Royle, Charles (Salford, West)


Delargy, Hugh
King, Dr. Horace
Seymour, Leslie


Dempsey, James
Lawson, George
Shinwell, Rt. Hon. E.


Diamond, John
Ledger, Ron
Short, Edward


Dodds, Norman
Lee, Frederick (Newton)
Silverman, Julius (Aston)


Donnelly, Desmond
Lee, Miss Jennie (Cannock)
Silverman, Sydney (Nelson)


Driberg, Tom
Lever, L. M. (Ardwick)
Skeffington, Arthur


Dugdale, Rt. Hon. John
Lewis, Arthur (West Ham, N.)
Slater, Mrs. Harriet (Stoke, N.)


Ede, Rt. Hon. C.
Lipton, Marcus
Slater, Joseph (Sedgefield)


Edwards, Rt. Hon. Ness (Caerphilly)
Loughlin, Charles
Small, William


Edwards, Robert (Bilston)
Lubbock. Eric
Smith, Ellis (Stoke, S.)


Edwards, Walter (Stepney)
Moban, Dr. J. Dickson
Sorensen, R. W.


Evans, Albert
McCann, John
Soskice, Rt. Hon. Sir Frank


Fernyhough, E.
MacColl, James
Spriggs, Leslie


Fitch, Alan
Mcinnes, James
Stewart, Michael (Fulham)


Fletcher, Eric
Mckay, John(Wallsend)
stones, william




Strauss, Rt. Hn. G. R. (Vauxhall)


Foot, Dingle (Ipswich)
Mackle, John(Enfiled, East)
Stross, Dr. Barnett(Stoke-on-Trent, C.)


Foot, Michael (Ebbw Vale)
McLeavy, Frank
Taverne, D.


Forman, J. C.
MacMillan, Malcolm(Western Isles)
Taylor, Bernard(Mansfield)


Fraser, Thomas (Hamilton)
MacPherson, Malcolm(Striling)
Thompson, Dr. Alan (Dunfermline)


Gaitskell, Rt. Hon. Hugh
Mallalieu, E. L.(Brigg)
Thornton, Ernest


Galpern, Sir Myer
Manuel, Archie
Thorpe, Jeremy


Ginsburg, David
Mapp, Charles
Timmons, John


Cordon Walker, Rt. Hon. P. C.
Marsh, Richerd
Tomney Frank


Griffiths, David (Rother Valley)
Mason, Roy
Wade, Donald


Griffiths, Rt. Hn. James (Llanelly)
Mayhew, Christopher
Warbey, William


Grimond, Rt. Hon. J.
Mendelson, J. J.
Watkins, Tudor


Hale, Leslie (Oldham, w.)
Millan, Bruce
Weitzman David


Hall, Rt. Hn. Glenvil (Colne Valley)
Milne, Edward
Wells, Percy(Faversham)


Hamilton, William (West Fife)
Mitchison, G. R.
Wells, William (Walsall, N.)


Hannan, William
Monslow, Walter
White, Mrs. Elrene


Harper, Joseph
Moody, A. S.
Wigg, George


Hayman, F. H.
Moyle, Arthur
Wilkins W A


Henderson, Rt. Hn. Arthur(RwlyRegis)
Mulley, Frederick
Willey, Frederick


Herbison, Miss Margaret
Neal, Harold
Williams D. J. (Neath)


Hilton, A. V.
Noel-Baker, Francis (Swindon)
Williams, LI. (Abertillery)


Holman, Percy
Oliver, G. H.
Williams, W. R. (Openshaw)


Hooson, H. E.
Owen, Will
Willis, E. G. (Edinburgh, E.)


Houghton, Douglas
Pannell, Charles (Leeds, W.)
Winterbottom, R. E.


Howell, Charles A. (Perry Barr)
Parglter, G. A.
Woof, Robert


Hoy, James H.
Parkin, B. T.
Zllliacus, K.


Hughes, Emrys (S. Ayrshire)
Paton, John



Hughes, Hector (Aberdeen, N.)
Pavitt, Laurence
TELLERS FOR THE AYES:


Hunter, A E.
Pearson, Arthur (Pontypridd)
Mr. Charles Grey and


Hynd, H. (Accrlngton)
Pentland, Norman
Mr. Redhead.




NOES


Agnew, Sir Peter
Box, Donald
Corfield, F. V.


Allason, James
Boyd-Carpenter, Rt. Hon. John
Costain, A. P.


Amery, Rt. Hon. Julian
Boyle, Sir Edward
Coulson, Michael


Arbuthnot, John
Brewis, John
Craddock, Sir Beresford


Balniel, Lord
Brooke, Rt, Hon. Henry
Critchley, Julian


Barber, Anthony
Brown, Alan (Tottenham)
Cunningham, Knox


Barlow, Sir John
Browne, Percy (Torrington)
Curran, Charles


Batsford, Brian
Buck, Antony
Currie, G. B. H.


Baxter, Sir Beverley (Southgate)
Bullard, Denys
Dance, James


Beamish, Col. Sir Tufton
Burden, F. A.
d'Avigdor-Goldsmid, Sir Henry


Bell, Ronald
Butcher, Sir Herbert
de Ferranti, Basil


Bennett, F. M. (Torquay)
Campbell, Sir David (Belfast, S.)
Donaldson, Cmdr. C. E. M.


Bennett, Dr. Reginald (Cos A Fhm)
Campbell, Gordon (Moray &amp; Nairn)
Doughty, Charles


Berkeley, Humphry
Carr, Compton (Barons Court)
du Cann, Edward


Bevins, Rt. Hon. Reginald
Carr, Robert (Mitcham)
Duncan, Sir James


Bidgood, John C.
Channon, H. P. G.
Eden, John


Biffen, John
Chataway, Christopher
Elliot, Capt. Walter (Carshalton)


Biggs-Davison, John
Clark, Henry (Antrim, N.)
Emery, Peter


Birch, Rt. Hon. Nigel
Clark, William (Nottingham, S.)
Emmet, Hon. Mrs. Evelyn


Bishop, F. P.
Cole, Norman
Erroll, Rt. Hon. P. J.


Black, Sir Cyril
Cooke, Robert
Farey-Jones, F. W.


Bossom, Clive
Cordeaux, Lt.-Col. J. K.
Farr, John


Bourne-Arton, A.
Cordle, John
Fell, Anthony







Finlay, Graeme
Legge-Bourke, Sir Harry
Ridley, Hon. Nicholas


Fisher, Nigel
Lewis, Kenneth (Rutland)
Robertson, Sir D. (C'thn's &amp; S'th'ld)


Fletcher-Cooke, Charles
Lilley, F. J. P.
Robinson, Rt. Hn. Sir R. (B'pool,S.)


Foster, John
Litchfield, Capt. John
Robson Brown, Sir William


Fraser, Hn. Hugh (Stafford &amp; Stone)
Lloyd, Rt. Hon. Selwyn (Wirral)
Rodgers, John (Sevenoaks)


Fraser, Ian (Plymouth, Sutton)
Longbottom, Charles
Roots, William


Galbraith, Hon. T. G. D.
Longden, Gilbert
Russell, Ronald


Gammans, Lady
Loveys, Walter H.
Sandys, Rt. Hon, Duncan


Gardner, Edward
Lucas, Sir Jocelyn
Seymour, Leslie


Gilmour, Sir John
Lucas-Tooth, Sir Hugh
Sharpies, Richard


Glover, Sir Douglas
McAdden, Sir Stephen
Shaw, M.


Glyn, Dr. Alan (Clapham)
McLaren, Martin
Shepherd, William


Glyn, Sir Richard (Dorset, N.)
Maclean, Sir Fitzroy(Bute&amp; N.Ayrs.)
Smith, Dudley (Br'ntf'd &amp; Chiswlck)


Gower, Raymond
McLean, Neil (Inverness)
Smithers, Peter


Green, Alan
Macleod, Rt. Hn. Iain (Enfield, W.)
Spearman, Sir Alexander


Grosvenor, Lt.-Col. R. G.
MacLeod, John (Ross &amp; Cromarty)
Stanley, Hon. Richard


Hall, John (Wycombe)
McMaster, Stanley R.
Stevens, Geoffrey


Hamilton, Michael (Wellingborough)
Macmillan, Maurice (Halifax)
Stodart, J. A.


Harris, Frederic (Croydon, N.W.)
Maddan, Martin
Moddart-scott, Col. air Malcolm


Harris, Reader (Heston)
Maginnis, John E.
Storey, Sir Samuel


Harrison, Brian (Maldon)
Maitland, Sir John
Studholme, Sir Henry


Harrison, Col. Sir Harwood (Eye)
Manningham-Buller, Rt. Hn. Sir R.
Summers, Sir Spencer


Harvey, John (Walthamstow, E.)
Markham, Major Sir Frank
Talbot, John E.


Harvie Anderson, Miss
Marlowe, Anthony
Tapsell, Peter


Hastings, Stephen
Marshall, Douglas
Taylor, Sir Charles (Eastbourne)


Hay, John
Marten, Nell
Taylor Edwin(Bolton,E.)


Heald, Rt. Hon. Sir Lionel
Mathew, Robert (Honiton)
Taylor, Frank (M'ch'st'r, Moss Side)


Henderson, John (Cathcart)
Matthews, Gordon (Meriden)
Teeling, Sir William


Hendry, Forbes
Maudling, Rt. Hon. Reginald
Thomas, Leslie (Canterbury)


Hicks Beach, Maj. w.
Mawby, Ray
Thomas, Peter (Conway)


Hiley, Joseph
Maxwell-Hyslop, R. J.
Thompson Kenneth (Walton)


Hill, Mrs. Eveline (Wythenshawe)
Maydon, Lt.-Cmdr. S. L. C.
Thompson, Richerd(Croydon, S.)


Hill, J. E. B. (S. Norfolk)
Mills, Stratton
Tiley, Arthur (Bradford, W.)


Hirst, Geoffrey
Miscampbell, Norman
Touche, Rt. Hon. Sir Gorden


Hobson, Sir John
Montgomery, Fergus
Turner, Colin


Hocking, Philip N.
Morgan, William
Turton, Rt. Hon. R. H.


Holland, Philip
Nabarro, Gerald
Tweedsmuir, Lady




van Straubenzee, W. R.


Hope, Rt. Hon. Lord John
Neave, Airey
Vaughan-Morgan, Rt. Hon. Sir John


Hopkins, Alan
Nicholson, Sir Godfrey
Vickers, Miss John


Hornby, R. P.
Noble, Michael
Wakefield, Sir Wavell


Howard, Hon. G. R. (St. Ives)
Nugent, Rt. Hon. Sir Richard
Walker, David


Hughes Hallett, Vice-Admiral John
Oakshott, Sir Hendrie
Walker, Peter


Hughes-Young, Michael
Orr, Capt. L. P. S.
Walker-Smith, Rt. Hon. Sir Derek


Hulbert, Sir Norman
Osborn, John (Hallam)
Wall, Patrick


Irvine, Bryant Godman (Rye)
Page, John (Harrow, West)
Ward Dame Irene


Jackson, John
Page, Graham (Crosby)
Watkinson, Rt. Hon. Harold


James, David
Panned, Norman (Klrkdale)
Webster, David


Jenkins, Robert (Dulwich)
Pearson, Frank (Clitheroe)
Wells, John (Maidstone)


Johnson, Dr. Donald (Carlisle)
Peyton, John
Whitelaw, William


Johnson Eric (Blackley)
Pickthorn, Sir Kenneth
Williams, Dudley (Exeter)



Pike, Miss Mervyn
Williams, Paul(Sunderland,S.)


Jones, Rt. Hn. Aubrey (Hall Green)
Pitman, Sir James
Wills Sir Gerald (Bridgwater)


Kerans, Cdr. J. S.
Pitt, Miss Edith
Wilson, Geoffrey(Truro)


Kerby, Capt. Henry
Powell, Rt. Hon. J. Enoch
Wise, A. R.


Kerr, Sir Hamilton
Price, David (Eastieigh)
Woodhouse, C. M.


Kershaw, Anthony
Profumo, Rt. Hon. John
Woollam, John


Kimball, Marcus
Proudfoot, Wilfred
Yates, William (The Wrekin)


Kirk, Peter
Pym, Francis



Lagden, Godfrey
Quennell, Miss J. M.
TELLERS FOR THE NOES:


Lancaster, Col. C. G.
Redmayne, Rt. Hon. Martin
Mr. Chichester-Clark and


Langford-Holt, Sir John
Rees-Davies, W. R.
Mr. Rees.


Leather, Sir Edwin
Renton, David

New Clause.—(ADDITIONAL REDUCED RATE RELIEF.)

The table in section two hundred and twenty (reduced rate relief) of the Income Tax Act, 1952, shall have effect with the substitution of the figure "£ 100" for the figure "£ 60" wherever that figure occurs.— [Mr. Callaghan.]

Brought up, and read the First time.

Mr. Callaghan: I beg to move, That the Clause be read a Second time.

Mr. Deputy-Speaker (Sir William Anstruther-Gray): It will be possible to discuss with this new Clause the new Clause— Further reduced rate relief.

Mr. Callaghan: This new Clause has the effect of increasing the amount of the reduced rate relief which an Income Tax payer can secure on his income, from £ 60 to £ 100. It is part of the campaign which I am running this year to try to get the people of this country to force the Chancellor to do for the P.A.Y.E. taxpayer what he has promised to do for the Schedule A taxpayer. It is part of the campaign to redress the balance of taxation which has swung so heavily against the P.A.Y.E. taxpayer during the decade of Conservative rule.
It is for those reasons that I want to give the Financial Secretary, if he is to reply, the opportunity of sitting on the penitential stool and telling us why the P.A.Y.E. taxpayer has been allowed to get into the position which he has, and whether it has been a deliberate act of Government policy and not just an accident to discriminate against the P.A.Y.E. taxpayer, as the Government have done over the last few years.
In the earlier stages of the Bill, I moved a series of Amendments and new Clauses to increase the personal allowance and to increase the children's allowance. They all failed, and I therefore knew that there was no point in putting down for fresh consideration what had been rejected by the Chancellor. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) therefore drafted another Amendment which would have the effect of increasing the reduced rate relief for those who paid tax. This is not my ideal way of approaching it, nor, I think, is it his. The Clause does not have the effect of increasing the allowances solely in the group I want to help. It increases them for everyone, including those who have had a substantial amount of largesse from the Chancellor in the last few years.
I cannot prevent this as the Clause is drafted. It is, as far as I am concerned, another shot in the battle that I am conducting. With my hon. Friends I intend to conduct this battle in the future, and as far as I can see it is making a good deal of progress as P.A.Y.E. taxpayers become more aware that the scales of taxation have swung badly against them in the last few years.
On previous occasions I have made comparisons between the amount of tax paid by various groups, and I must repeat some of them. The amount of additional relief I am proposing for a taxpayer would vary according to his income, and it cannot begin to take effect unless the man is liable to tax. This is a difficulty in the way of the Clause, but I do not mind that for purposes of illustration. It will begin to take effect, for example, for a family man with three children under 16 if his income is between £ 15 and £ 17 a week. For a family man with two children aged between 11 and 16 it will begin to take effect if his income is between £ 13 and £ 15 a week.
It really begins to bite on those who need the extra— a family man with one child under eleven whose income is as small as £ 10 a week. At between £ 10 and £ 12 a week he would get the benefit proposed by the Clause. No one would argue that people at this level should not be entitled to first and early consideration by the Chancellor. They should get the extra and in my view it has been a deliberate act of policy that they have been omitted from the great benefits that other groups have secured in recent years.
The late Hugh Dalton first introduced the idea of reduced rate relief—

Orders of the Day — ROYAL ASSENT

6.13 p.m.

Message to attend the Lords Commissioners:

The House went:— and, having returned;

Mr. SPEAKERreported the Royal Assent to:

1. Animals (Cruel Poisons) Act, 1962.
2. Recorded Delivery Service Act, 1962.
3. Housing (Scotland) Act, 1962.
4. Agriculture and Forestry Associations Act, 1962.
5. Northern Ireland Act, 1962.
6. Sea Fish Industry Act, 1962.
7. Marriage (Wales and Monmouthshire) Act, 1962.
8. Health Visiting and Social Work (Training) Act, 1962.
9. Melville Trust Order Confirmation Act, 1962.
10. Saint Thomas Apostle (Queen Street) Churchyard Act, 1962.
11. Saint Peter's Church, Nottingham, Churchyard Act, 1962.
12. Shoreham Harbour Act, 1962.

And to the following Measure, passed under the Church of England Assembly (Powers) Act, 1919:

Ecclesiastical Fees Measure, 1962 (No. 1).

FINANCE BILL

As amended (in Committee and on recommittal), again considered.

6.25 p.m.

Mr. Callaghan: The P.A.Y.E. taxpayers have undoubtedly had an instinct that too much was being demanded from them, and I think they are right. In ratio to what is being paid by other groups, there is no doubt that the P.A.Y.E. men and women have not had a fair share of the taxation reliefs that have been going.
I was challenged on this in a not very detailed way by the Financial Secretary on 31st May. I must not refer to past debates and so I will not go into the details, except to say that he told me that to make a comparison between what was being paid by various groups ten years ago and now was not my most powerful comparison, because everybody knew that there was an excess profits levy then and, clearly, that was meant to be short-term. I was not about when he said this or I should have challenged him straightaway.
So that there shall be no dubiety and doubt about it. I have obtained for my own great edification and better information some details of tax paid by companies and groups of individuals since 1949– 50. This information makes very interesting reading. I think I ought to publish the tables as an addition to the Government White Paper next year. It might lose them a few votes,
I cannot go into all the figures, but I ask the Financial Secretary to take from me the broad position if I put it in percentage terms, for it is only in this way that one can see whether the P.A.Y.E, taxpayer should have had more relief or not. I have extracted all my figures from the Report of the Commissioners of Inland Revenue.
The gross true income of companies during the decade 1950– 60 increased by 90 per cent. The actual income— I am using the technical terms which are to he found in the Report, and the Financial Secretary will know better than most hon. Members that a particular meaning is attached to them— of P.A.Y.E. taxpayers increased during that decade by

100 per cent. The amount of tax paid by companies on the increase of 90 per cent. in their gross true incomes is 16 per cent. The amount of tax paid by the whole group of P.A.Y.E. taxpayers is 106 per cent. How does the Financial Secretary explain this? What shape has progressive Conservatism taken to itself that the companies of the country have had an increase in their gross true income so much larger than the increase in the amount of tax which they have paid whereas the total income of the P.A.Y.E. taxpayers as a group has gone up by much the same amount but the amount of tax they have paid has gone up six times as much? We know it is a deliberate act of policy. I accuse the Government of being deliberately unfair to the P.A.Y.E. taxpayer in the course of their fiscal policies over the last ten years.
6.30 p.m.
I have the figures here and I will give three or four of them to illustrate my point, since I have been challenged by the Financial Secretary. The gross true income of companies in 1949– 50 was £ 2,816 million and in 1959– 60 it was £ 5,318 million. Capital allowances and depreciation have increased substantially. The total amount of Income Tax plus Profits Tax, or Excess Profits Tax or Excess Profits Levy— I do not mind which comparisons the Financial Secretary cares to choose— paid on the gross income of £ 2,816 million was £ 1,111 million in 1950. Today the total amount of Income Tax and Profits Tax paid on a gross true income of £ 5,318 million is only £ 1,281 million. Surely that strikes hon. Members as astonishing in itself— the fact that the income of these companies has gone up by £ 2,500 million and the amount of tax they have paid has gone up by £ 170 million.
When we come to the P.A.Y.E. taxpayer it is a very different story. The total product of tax on his side, which ten years ago was £ 488 million, is now £ 1,008 million. The P.A.Y.E. taxpayers are paying more than twice as much tax, as a group, as they were paying ten years ago. Larger incomes, certainly; therefore larger tax, certainly. But if we are going to try to keep a balance— or does the Financial Secretary


not think it necessary to keep a balance? — between the taxation yielded by companies and the taxation yielded by individuals, there can be no doubt that the scales have swung, as I have said time after time and will go on saying until it is put right, heavily against the P.A.Y.E. taxpayer.
This accounts for the substantial increase in Stock Exchange shares and prices of shares over the last decade. This accounts for the hundreds of millions of pounds which have been distributed in ordinary share dividends since 1950. Perhaps I may give the Committee some figures. According to the Stock Exchange table which has been supplied to hon. Members, ordinary dividends in 1950 were £302 million, and in 1960 £902 million. Ordinary dividends have increased by three times as much in the decade. Where have they got the money from? They have got the money from the Chancellor. He has paid these dividends because he has remitted the taxation on companies' profits so as to leave them with a much larger share for distribution to their shareholders.
When the Chancellor talks to us about an incomes policy, I am bound to say that he would get more assent from this side of the Committee and from the ordinary people if he had not shown such partiality in favour of shareholders and companies profits and such gross discrimination against the P.A.Y.E. taxpayers generally. It is this simple fact which I believe has got to be understood by the country; and then when it is, the country will force the Chancellor to do for the P.A.Y.E. taxpayer generally what he has undertaken to do for the Schedule A taxpayer.
I read with great profit the "Bulletin for Industry" prepared by the Information Division of the Treasury for May, 1962. In it there is an article on "Income from profits". Generally speaking these articles are prepared very impartially and contain a great deal of useful information. This article on "Income from profits" does not strike me as attaining the same level, and I shall be glad if this can be looked into.
This article seems to me to be designed to support the Chancellor's policy on incomes, about which I do not complain,

by presenting a picture of incomes from profits that neglects these facts which I have been bringing out and, indeed, gives a picture that is by no means complete. I regret this because this ought to be regarded by everyone as being beyond matters of party dispute. It ought to be a document, as indeed it normally is, that is concerned with factual material which all Members find useful. But this article "Income from profits" might well have been written by the Chancellor— I am sure it was not — in order to support his own point of view about the relationship between profits and wages.
I hope that when further articles are produced on the question of the relationship between profits and wages, questions of taxation will be taken into account so that the public are told by this impartial bulletin— as, indeed, it is impartial; I assume that this is a defect in the knowledge of the compilers of the bulletin— that the change in the incidence of taxation over the last ten years has resulted in a substantial distortion of the amounts paid by the P.A.Y.E. taxpayers as a group.
I do not think I have gone wide of my Clause. I am demonstrating that where relief is due, it is long overdue for the P.A.Y.E. taxpayer. This is undoubtedly where the shoe has pinched. It is these groups of people who have felt that they are paying too much in taxation and who are at this moment being hard hit by the unprecedented rise in the cost of living. I use the word "unprecedented" advisedly. The increase in the cost of living during the last twelve months has been higher than at any time since the present index was introduced— this at a time when the pay pause has been partially successful, if we are to believe the Chancellor of the Exchequer. At times he seems to boast of how successful it has been.
At a time that he boasts that he has succeeded in keeping wages down, the cost of living in this country has gone up to a record level. There is no other period when the level was higher since the present index was prepared. The Financial Secretary will be able to produce the period of the Korean war. I have no doubt that we shall hear about that, but if he wants to contrast the period of a war in which this country was engaged


with a post-war election period, in which we have "never had it so good," I can only say that I do not think much of the propaganda that the Conservative Government put out in order to win the last Election.
Clearly these two things are not corn-parable. However, the Financial Secretary can have his comparison, if he wishes to make the point here this afternoon. It does not bring much comfort to those who are suffering from it at present. Those who are suffering from it are the very people who have been hit either by the Government's neglect or the Government's failure to serve the interests of the P.A.Y.E. taxpayer. It is this group about whom I am concerned and whose position I am determined to get the Chancellor to put right. I hope we shall continue to press him until we get some amelioration in the allowances which are given.
This afternoon I proposed the reduced rate. If I had any responsibility for it I would try to adjust the burden of taxation so that the first relief was given not on the reduced rate but on the personal allowances. That is where it should come. I am moving this Clause in the profound belief that if the British public understand what the Chancellor has done for them over the last seven or eight years, Members will be bombarded with correspondence and the Chancellor will be forced to put the matter right in due course.

Mr. Bruce Millan: I am very glad that my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) has placed such a tremendous amount of importance on this new Clause, because it is a very important new Clause indeed. It is important also that we should place the very modest proposals made in both these new Clauses in the general context of what has been happening to the taxation paid by P.A.Y.E. wage and salary earners over The last few years. My hon. Friend gave a number of comparisons between the taxes paid by the P.A.Y.E. taxpayer and the taxes paid by companies and other profit earners.
I want to put this whole question in the simplest possible terms by taking the illustration of what happens from the Revenue point of view when there is a

rise in incomes over a period of years. If we look at the rise in incomes which we have had over the last few years we see that the rise is made up of two factors. First of all, there is simply the fall in the value of money, and so the rise is really a rise in money incomes, not in real terms. Secondly there is the rise in incomes in real terms. Let us just look at each from the point of view of the taxation position.
It is pretty obvious that if over a period of years money incomes rise and there is no corresponding rise in personal allowances or in the reduced rate relief then the amount of real taxation Which the taxpayer pays in fact increases. It is the case that there are three particular allowances which are made in this respect. There is the earned income relief, there is the personal allowance, and there is the additional reduced rate relief. The earned income relief goes up automatically. It is applied as a percentage of income and goes up automatically if the income rises, but this does not, of course, apply either to personal allowance or to the bands at which the reduced rate relief operates, and the result is that if there is a rise in money incomes and there is no corresponding change in either the personal allowance or the bands of reduced rate relief the amount of tax paid, I repeat, in real terms by the taxpayer increases.
Look at it from the point of view of a rise in real incomes over a period of years. It may be argued, of course, that if there is a rise in real incomes it is perfectly legitimate that there should be a rise in the taxation paid, but again, looking at it simply from that point of view, unless there are corresponding rises not only in the personal allowance but also in the reduced rate relief bands then the percentage of income which the taxpayer pays to the Revenue again increases. Therefore, of that additional income, which is accumulating because of rises in real incomes, the percentage taken by the Revenue in taxation is not the same percentage as was taken previously but a considerably higher percentage. That is simply because as real incomes rise more and more people get up to higher marginal rates of taxation and unless there are


adjustments the real burden in percentage terms on the taxpayer continues to increase.
When we have, as we have had over the last few years, a combination of a fall in the value of money and a rise of incomes in money terms there is a tremendous uncovenanted benefit to the Revenue, unless corresponding adjustments are made in personal allowances and in the bands at which reduced rate relief operates. The Chancellor does not have to reduce the personal allowances. He does not have to make any downward adjustments. By doing nothing at all precisely the same thing happens, and that is precisely what has been happening over the last few years.
The innocent taxpayer, who can be excused for not understanding all the intricacies of this, is actually paying over a higher percentage of his income to the Revenue, and again I say that this has happened because there is no adjustment in the personal allowance or in the bands at which reduced rate relief operates. There is a tremendous amount of additional revenue which the Government have been gaining.
6.45 p.m.
It is really a matter of simple arithmetic. The ordinary personal allowance and the married allowance, for example, have not been altered since 1955. They are still at £ 145 and £ 240. There has been some increase in child allowances. The ordinary child allowance which applies to children under the age of 11 is being continued, but for children from the age of 11 to 16 there has been some increase in the allowance, but When one comes to the bands of reduced rate relief, which are precisely the subject of these new Clauses, one finds that these bands have not been changed since 1955.
I admit right away that there has been a change in the actual rate of taxation. That happened in 1959, in the pre-election Budget, with regard both to the standard rate and with regard to the reduced rate relief, but those reductions, particularly in the standard rate, benefited to a very large extent— not exclusively, but to a preponderating extent— people with, on the whole, the larger incomes, and the ordinary taxpayer who

is just on the border line of paying tax, the taxpayer who pays tax on a comparatively small part of his income, gained very little indeed from the concessions which were made in 1959, and certainly gained nothing which can possibly compensate for the fall in the value of personal allowances since 1955. That is the effect of making for him no change at all since 1955 in the bands at which reduced rate relief operates.
The change in the bands of reduced rate relief in 1955 was a change in the adverse direction, because previous to that, from 1953 to 1955, a total income of £ 400 was subject in one respect or another to reduced rate relief and that was actually reduced in 1955 to £ 360, and it has stayed at £ 360 right up to the present day.
There is an obvious injustice here. Naturally, the Chancellor does not want to argue the case— and I have not heard the Government argue the case— in these terms, and I hope the Financial Secretary, who will answer this debate, will not argue in these terms. It is really quite easy to take average incomes from 1955 to 1962 and, by suitable manipulation of the figures, say people are paying less tax now than they would have been paying had the rates operative in 1951 been continued; but, of course, we on this side of the House have never argued that at all. To argue that is simply to substantiate our case.
The argument we are making is that as money incomes rise, and even as real incomes rise, there must be adjustments in these personal allowances and in the reduced rate relief bands for ordinary taxpayers, if they are not going to suffer. If one looks at the whole pattern over the last ten years there is no doubt at all that the Government have been able to extract considerable sums of additional revenue by this simple device of making no adjustments at all. By not making adjustments in money terms, there is a reduction in real terms in personal allowances and in the rates of reduced rate relief.
These proposals we are making tonight I consider to be unduly modest. The first simply substitutes £ 100 for the £ 60 in the reduced rate relief band at which tax is payable at 1s. 9d., and the second new Clause is also a very modest


proposal. I can, perhaps, anticipate what the Financial Secretary will say in his speech. I am sure he will say that, apart from all other considerations— the reduction in the standard rate, and so on, of which I have no doubt we shall hear— to grant this very modest proposal would be a prohibitive cost. I do not know what the actual figure is going to be, but the argument that this very modest proposal is going to be a prohibitive cost gives some idea of the tremendous amount of additional revenue which the Government have been getting— as it were, by a subterfuge — all these years. This is exactly the argument which applies when we discuss a modest increase of, say, £ 10 in personal allowances. The Government say that they cannot do it because it will cost, say, £ 20 million. This means that by subterfuge— that is not too strong a term— they are taking £ 20 million extra from the taxpayer by this simple device.
I think that the case for making these changes this year is unanswerable. This is a modest proposal. Even if the Government do not accept it, I hope that the ordinary taxpayer, who can be excused not understanding the intricacies of the tax provisions, will come increasingly to realise the unfair way in which the Government have been treating him over the past few years and propose to continue to treat him under this Bill.

The Financial Secretary to the Treasury (Sir Edward Boyle): The hon. Member for Cardiff, South-East (Mr. Callaghan) said that he might have gone a shade wide in his speech, but he said practically nothing about the details of the new Clauses which we are discussing. I will not answer him at length tonight on the points which he made. It is true that I referred to him when replying at rather short notice to an Adjournment debate some weeks ago, and it is fair that he should take the opportunity of replying, in turn, to me. I am sorry that I was not able to give him notice on that occasion.

Mr. Callaghan: I have been making this case ever since the Budget. I first put it on the day after Budget day, and I have been making it at every stage of the Finance Bill. Never have I had a reply. The hon. Gentleman says that he will not be able to reply this evening.
When will he give me a reply, and when will the Government state their case on what I regard as the indisputable facts which I have been producing whenever I have had the opportunity?

Sir E. Boyle>: If the hon. Member looks again at the speeches which I made in the Budget debate and in Committee on the Bill he will find that I have said a lot about the consequences of taxation policy during the last ten years. I will study his figures on the subject of industrial taxation, but he must admit that industrial taxation has not come down in this Parliament. Profits Tax has twice been increased. I will look at the article in the "Bulletin for Industry" which he mentioned, but it was in the Economic Survey that the Government first pointed out that industrial profits had fallen by £ 200 million in 1961 compared with 1960.

Mr. Callaghan: Will the hon. Member take it from me that in 1958– 59, about the time of the election, companies were paying £ 1,458 million in Income Tax and Profits Tax and that in the following year, the last year for which the Inland Revenue have given figures, they paid £ 1,281 million, a substantial reduction, although their income had risen by £ 200 million?

Sir E. Boyle: The hon. Member knows that when Profits Tax is raised the effect is not felt in that financial year. We are therefore not in a position to see the effect on company taxation. I am aware that the standard rate was reduced in the last Parliament, but I am talking about the present Parliament, and in the present Parliament industrial taxation has risen.
When we are discussing indirect taxation hon. Members apposite accuse the Government of being engaged in a plot to transfer taxation from direct to indirect taxation. This evening the hon. Member far Glasgow, Craigton (Mr. Millan) pointed out that when prices and incomes bath rise the yield of direct taxation is bound almost at once to rise. I have made this point often enough when answering hon. Members on the proportions of tax borne by direct and indirect taxation. When we are discussing Income Tax, hon. Members opposite say, "I know that direct taxation is very high, but far too high a


proportion of it falls on the shoulders of the P.A.Y.E. taxpayer". Hon. Members opposite— and I entirely accept their sincerity— say that they are concerned about economic growth and about this country putting up a first-class economic performance. But there is a point beyond which one simply cannot penalise success in the taxation either of companies or of individuals if this country is to put up a first-class economic performance, and hon. Members should bear that point in mind rather more than they do.
The first new Clause which we are discussing extends the band of taxable income chargeable at the lowest rate— the 1s. 9d. rate— from £ 60 to £ 100. There is a corresponding cut of £ 40, from £ 150 to £ 110, in the width of the second band chargeable at 4s. 3d. The third reduced band, chargeable at 6s. 3d., is left unchanged. The cost of this proposal would be £ 97 million in a full year. It is therefore substantially higher than the cost of the proposal for altering the personal allowances which hon. Members have put forward. It is appreciably more than the total sum of the Surtax reductions.
I will give reasons for suggesting that this proposal is not in line with what hon. Members opposite have said about taxation, including the hon. Member for Cardiff, South-East. Let us consider what the effect of the Clause would be if it were accepted. The upward extension of the lowest reduced band would give no relief to any taxpayer whose taxable income was £ 60 or less. It would not benefit a single man or woman with a total income of less than £ 4 19s. a week or a married man without dependants with less than £ 7 8s. a week, nor would it benefit a married man with two children under 11 who was earning less than £ 12 7s. a week. People with taxable incomes exceeding £ 60 would benefit, and this benefit would rise until it reached £ 5 for a taxable income of £ 100. For taxable incomes greater than £ 100 it would be a fixed benefit of £ 5.
Under the existing law a taxable income of £ 60 attracts tax liability of £ 5 5s. This Clause would do nothing for those people whose incomes are so small that their present tax bill is £ 5 5s. a year or less, but it would give a tax remission

to all the better-off taxpayers and a great majority would benefit to the extent of £ 5. I am pointing out that in my view this is a very wasteful proposal. When one is considering the question of direct taxation, it seems that the Clause is totally inconsistent with the attitude adopted by hon. Members opposite during Second Reading and in Committee. They said on that occasion that priority ought to be given to the claims of those with the smallest incomes of all, and neither this Clause nor the Clause which we are discussing with it accords that priority.

7.0 p.m.

Mr. Houghton: The hon. Gentleman will bear in mind that earlier we were proposing to increase the personal allowances. That would have taken care of many taxpayers whose present tax burden is relatively small, but the Committee rejected our proposals in that respect so that we are now left with discussing proposals with which we can still proceed. It is a little hard to be accused of trying to do something which the hon. Gentleman suggests is inconsistent with our philosophy on taxation when we have already tried to achieve the very purpose which he now criticises us for not seeking to do.

Sir E. Boyle: I cannot see that that point is either fair or valid. We discussed a proposal to increase allowances in Committee. I said some words on that occasion which I shall repeat to the House I made it quite plain that the economic circumstances did not permit the acceptance of that proposal this year but, I hope, I also made it plain to the Committee on that occasion that my right hon. and learned Friend realised clearly the severe burden of direct taxation today and the desirability of cutting it down.
I am entitled to point out that the proposal which we are now considering on Report, taken by itself, is very much less desirable than the proposal which we discussed in Committee When we debated these matters in Committee I based myself primarily on arguments of cost On this occasion I do not think that even considered on its merits this proposal would be a good way of reducing direct taxation to the extent of nearly £ 100 million. If we take the other Clause


which we are discussing and to which not a great deal of reference has been made its cost would be as much as £ 157 million in a full year.

Mr. Douglas Jay: As the hon. Gentleman has now become such an extreme radical and does not like this proposal from that point of view, may I ask if he is now willing to accept on behalf of the Government the proposal which we made in Committee? As for cost, is the hon. Gentleman aware that economic conditions have changed so much since April that it is now plain that the Budget was much too deflationary and therefore he can well afford to do this?

Sir E. Boyle: No doubt when we discuss the Finance Bill on Third Reading on Friday we can discuss again the economic background against which the Bill is presented. I cannot on economic grounds reverse the advice which I gave to the Committee on allowances, but the proposals before us are not only much more expensive but are less justified on merit. I think that it is permissible on Report to point out that a proposal put forward at this stage is on many grounds even less desirable than that which was brought forward in Committee.

Mr. Houghton: At this stage these proposals are the only ones left to us. What is the hon. Gentleman complaining about? We tried earlier to do something and we failed, and now we are driven to a second line.

Sir E. Boyle: The second line is still a good deal worse than the first line. The hon. Gentleman is perfectly fair in saying that this was the one means left to him and his hon. Friends of raising this matter.

Mr. Callaghan: Why not answer this debate instead of destroying the Clause?

Sir E. Boyle: It is perfectly legitimate for anyone who is replying to a debate to address himself to the particular new Clause or Amendment which is being moved. In the House we are sometimes too ready to assume that the Minister is off-side when he addresses himself to the proposals before us.

Mr. Callaghan: The hon. Gentleman is entitled to destroy the new Clause but he has been a long time doing it and I

destroyed it myself before I developed the argument which has now arisen. I shall soon cease to have the respect I have for the hon. Gentleman. He has failed consistently to face the real argument. Will he address himself to it? The P.A.Y.E. taxpayer has been unfairly dealt with in comparison with other groups. Will the hon. Gentleman address himself to that and will he set out to put it right?

Sir E. Boyle: I was intending to complete my speech by addressing myself again to what we were discussing in Committee when my former noble Friend the then Member for Dorset, South asked whether the Government still put a high priority on reducing direct taxation. I leave the House in no doubt about this. The Government certainly do. I was sympathetic in Committee to much that was said then and again today by the hon. Member for Craigton about the effect of rising incomes and rising prices on the incidence of our tax system.
I can say to the House, as I have said before, that the Government intend to reduce taxation when economic circumstances permit. I would not like to commit myself today as to the priority which the Government will adopt— whether they prefer first and foremost to reduce the standard rate or to increase allowances.

Mr. Callaghan: Shocking, scandalous.

Sir E. Boyle: The hon. Member may think it shocking and scandalous, but it is directly relevant to the Clause, and I say it again, that when one is considering priorities for the reduction of direct taxation, in my view, standard rates and tax allowances are both, as the economic circumstances permit, a preferable way of approaching this matter than the suggestion made in the two new Clauses.

Mr. Callaghan: I should like to have the leave of the House to speak for one minute, as we are not in Committee. I shall regard it as an absolute outrage if in the next Budget the Chancellor puts forward a proposal to reduce the standard rate of company taxation if he does not take the opportunity, if he has it, of increasing personal allowances. It will be one of the biggest scandals perpetrated by any Chancellor. Already the


position has gone too far. The Financial Secretary knows it, and that is why he has spent so much time on the technicalities and the nature of the Clause instead of facing the argument.
The hon. Gentleman, with his intellectual honesty, knows that he cannot face it. It is a first priority for the House, and hon. Members opposite should have joined in the debate, to insist that the Government relieve the P.A.Y.E. tax-

payer by increasing personal allowances. There is nothing that stands ahead of that today in the consideration of taxation matters. Whatever the technical deficiencies of the Clause— which I acknowledged long before the Financial Secretary spoke— we shall vote in the Lobby.

Question put,That the Clause be read a Second time:—

The House divided:Ayes 186, Noes 236.

Division No. 231.]
AYES
[7.8 p.m.


Abse, Leo
Grimond, Rt. Hon. J.
Oliver, C. H.


Alnsley, William
Hale, Leslie (Oldham, W.)
Owen, Will


Albu, Austen
Hall, Rt. Hn. Glenvil (Colne Valley)
Padley, W. E.


Allaun, Frank (Salford, E.)
Hamilton, William (West Fife)
Pannell, Charles (Leeds, W.)


Allen, Scholefield (Crewe)
Hannan, William
Pargiter, G. A.


Awbery, Stan
Harper, Joseph
Paton, John


Bacon, Miss Alice
Hayman, F. H.
Pavitt, Laurence


Baxter, William (Stirlingshire, W.)
Henderson, Rt. Hn. Arthur(Rwly Regis)
Pearson, Arthur (Pontypridd)


Bence, Cyril
Herbison, Miss Margaret
Pentland, Norman


Bennett, J. (Glasgow, Bridgeton)
Hilton, A. V.
Popplewell, Ernest


Benson, Sir George
Holman, Percy
Prentice, R. E.


Blackburn, F.
Houghton, Douglas
Price, J. T. (Westhoughton)


Blyton, William
Howell, Charles A. (Perry Barr)
Proctor, W. T.


Boardman, H.
Howell, Denis (Small Heath)
Pursey, Cmdr. Harry


Bowden, Rt. Hn. H. W. (Leics. S.W.)
Hoy, James H.
Randall, Harry


Bowen, Roderic (Cardigan)
Hughes, Emrys (S. Ayrshire)
Rankin, John


Boyden, James
Hunter, A. E.
Reid, William


Braddock, Mrs. E. M.
Hynd, H. (Accrington)
Rhodes, H.


Bray, J. W.
Hynd, John (Attercliffe)
Roberts, Albert (Normanton)


Brockway, A. Fenner
Irvine, A. J. (Edge Hill)
Robertson, John (Paisley)


Broughton, Dr. A. D. D.
Irving, Sydney (Dartford)
Ross, William


Brown, Rt. Hon. George (Belper)
Janner, Sir Barnett
Royle, Charles (Salford, West)


Brown, Thomas (Ince)
Jay, Rt. Hon. Douglas
Shinwell, Rt. Hon. E.


Butler, Herbert (Hackney, C.)
Jeger, George
Short, Edward


Butler, Mrs. Joyce (Wood Creen)
Jenkins, Roy (Stechford)
Silverman, Julius (Aston)


Callaghan, James
Johnson, Carol (Lewisham, S.)
Silverman, Sydney (Nelson)


Chapman, Donald
Jones, Dan (Burnley)
Skeffington, Arthur


Cliffe, Michael
Jones, Elwyn (West Ham, S.)
Slater, Mrs. Harriet (Stoke, N.)


Collick, Percy
Jones, jack (Rotherham)
Slater, Joseph (Sedgefield)


Craddock, George (Bradford, S.)
Jones, J. Idwal (Wrexham)
Small, William


Cronln, John
Jones, T. W. (Merioneth)
Smith, Ellis (Stoke, S.)


Crosland, Anthony
Kelley, Richard
Snow, Julian


Cullen, Mrs. Alice
Key, Rt. Hon. C. W.
Sorensen, R. W.


Dalyell, Tarn
Lawson, George
Spriggs, Leslie


Darling, George
Ledger, Ron
Stewart, Michael (Fulham)


Davies, G. Elfed (Rhondda, E.)
Lee, Frederick (Newton)
Stones, William


Davies, Ifor (Gower)
Lee, Miss Jennie (Cannock)
Stross, Dr.Barnett(Stoke-on-Trent, C.)


Deer, George
Lever, L. M. (Ardwick)
Swingler, Stephen


Delargy, Hugh
Lewis, Arthur (West Ham, N.)
Taveme, D.


Dempsey, James
Lipton, Marcus
Taylor, Bernard (Mansfield)


Diamond, John
Loughlin, Charles
Thompson, Dr. Alan (Dunfermline)


Dodds, Norman
Lubbock, Eric
Thornton, Ernest


Donnelly, Desmond
Mabon, Dr. J. Dickson
Tomney, Frank


Driberg, Tom
McCann, John
Wade, Donald


Dugdale, Rt. Hon. John
MacCoil, James
Warbey, William


Ede, Rt. Hon. C.
Mclnnes, James
Watkins, Tudor


Edeiman, Maurice
McKay, John (Wallsend)
Weitzman, David


Edwards, Rt. Hon. Ness (Caerphilly)
Mackie, John (Enfield, East)
Wells, Percy (Faversham)


Edwards, Walter (Stepney)
McLeavy, Frank
Wells, William (Walsall, N.)


Evans, Albert
MacMillan, Malcolm (Western Isles)
White, Mrs. Eirene


Fernyhough, E.
MacPherson, Malcolm (Stirling)
Wilkins, W. A.


Fitch, Alan
Manuel, Archie
Willey, Frederick


Fletcher, Eric
Mapp, Charles
Williams, D. J. (Neath)


Foot, Dingle (Ipswich)
Mason, Roy
Williams, LI. (Abertillery)


Foot, Michael (Ebbw Vale)
Mendelson, J. J.
Williams, W. R. (Openshaw)


Forman, J. C.
Millan, Bruce
Willis, E. G. (Edinburgh, E.)


Fraser, Thomas (Hamilton)
Milne, Edward
Winterbottom, R. E.


Gaitskell, Rt. Hon. Hugh
Mitchison, G. R.
Woof, Robert


Galpern, Sir Myer
Monslow, Walter
Wyatt, Woodrow


Ginsburg, David
Moody, A. S.
Zllliacus, K.


Gordon Walker, Rt. Hon. P. C.
Moyle, Arthur



Griffiths, David (Rother Valley)
Mulley, Frederick
TELLERS FOR THE AYES:


Griffiths, Rt. Hon. James (Llanelly)
Neal, Harold
Mr. Redhead and Mr.J Grey.




NOES


Agnew, Sit Peter
Gresham Cooke, R.
Mott-Radclyffe, Sir Charles


Allason, James
Grosvenor, Lt.-Col. R. G.
Nabarro, Gerald


Amery, fit Hon. Julian
Gurden, Harold
Nicholls, Sir Harmar


Arbuthnot, John
Hall, John (Wycombe)
Nicholson, Sir Godfrey


Atkins, Humphrey
Hamilton, Michael (Wellingborough)
Noble, Michael


Balniel, Lord
Harris, Frederic (Croydon, N.W.)
Nugent, Rt. Hon. Sir Richard


Barber, Anthony
Harris, Reader (Heston)
Oakshott, Sir Hendrie


Barlow, Sir John
Harrison, Brian (Maldon)
Orr, Capt. L. P. S.


Batsford, Brian
Harrison, Col. Sir Harwood (Eye)
Osborn, John (Hallam)


Baxter, Sir Beverley (Southgate)
Harvey, John (Walthamstow, E.)
Page, Graham (Crosby)


Beamish, Col. Sir Tufton
Harvie Anderson, Miss
Page, John (Harrow, West)


Bell, Ronald
Hastings, Stephen
Panned, Norman (Kirkdale)


Bennett, F. M. (Torquay)
Hay, John
Pearson, Frank (Clitheroe)


Bennett, Dr. Reginald (Cos &amp; Fhm)
Heald, Rt. Hon. Sir Lionel
Peyton, John


Berkeley, Humphry
Henderson, John (Cathcart)
Pickthorn, Sir Kenneth


Bevins, Rt. Hon. Reginald
Hendry, Forbes
Pitman, Sir James


Bidgood, John C.
Hicks Beach, Maj. W.
Pitt, Miss Edith


Biffen, John
Hiley, Joseph
Pott, Percivall


Biggs-Davison, John
Hill, Mrs. Eveline (Wythenshawe)
Price, David (Eastleigh)


Birch, Rt. Hon. Nigel
Hill, J. E. B. (S. Norfolk)
Proudfoot, Wilfred


Bishop, F. P.
Hirst, Geoffrey
Pym, Francis


Black, Sir Cyril
Hobson, Sir John
Ramsden, James


Bossom, Clive
Hocking, Philip N.
Redmayne, Rt. Hon. Martin


Bourne-Arton, A.
Ridley, Hon. Nicholas
Holland, Philip


Box, Donald
Hornby, R. P.
Robinson, Rt. Hn. Sir R. (B'pool, S.)


Boyd-Carpenter, Rt. Hon. John
Hornsby-Smith, Rt. Hon. Dame P.
Roots, William


Boyle, Sir Edward
Howard, Hon. G. R. (St. Ives)
Russell, Ronald


Brewls, John
Howard, John (Southampton, Test)
Sandys, Rt. Hon. Duncan


Brooke, Rt. Hon. Henry
Hughes-Young, Michael
Seymour, Leslie


Brown, Alan (Tottenham)
Hulbert, Sir Norman
Shaw, M.


Browne, Percy (Torrington)
Iremonger, T. L.
Shepherd, William


Bryan, Paul
Irvine, Bryant Godman (Rye)
Skeet, T. H. H.


Buck, Antony
Jackson, John
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Bullard, Denys
James, David
Smithers, Peter


Bull us, Wing Commander Eric
Johnson, Dr. Donald (Carlisle)
Spearman, Sir Alexander


Burden, F. A.
Johnson, Eric (Blackley)
Stanley, Hon. Richard


Butcher, Sir Herbert
Jones, Rt. Hn. Aubrey (Hall Green)
Stevens, Geoffrey


Campbell, Sir David (Belfast, S.)
Joseph, Sir Keith
Stodart, J. A.


Campbell, Gordon (Moray &amp; Nairn)
Kerans, Cdr. J. S.
Stoddart-Scott, Col. Sir Malcolm


Carr, Comnton (Barons Court)
Kerby, Capt. Henry
Storey, Sir Samuel


Carr, Robert (Mitcham)
Kerr, Sir Hamilton
Studholme, Sir Henry


Channon, H. P. C.
Kershaw, Anthony
Summers, air spencer


Chataway, Christopher
Kimball, Marcus
Talbot, John E.


Chichester-Clark, R.
Kirk, Peter
Taylor, Sir Charles (Eastbourne)


Clark, William (Nottingham, S.)
Lagden, Godfrey
Taylor, Edwin (Bolton, E.)


Cleaver, Leonard
Langford-Holt, Sir John
Taylor, Frank (M'ch'st'r, Moss Side)


Cole, Norman
Leather, Sir Edwin
Taylor, W. J. (Bradford, N.)


Cordeaux, Lt.-Col. J. K.
Legge-Bourke, Sir Harry
Teeling, Sir William


Cordle, John
Lewis, Kenneth (Rutland)
Thomas, Leslie (Canterbury)


Costain, A. P.
Lilley, F. J. P.
Thomas, Peter (Conway)


Coulson, Michael
Linstead, Sir Hugh
Thompson, Kenneth (Walton)


Craddock, Sir Bcresford
Litchfield, Capt. John
Thompson, Richard (Croydon, S.)


Critchley, Julian
Lloyd, Rt. Hon. Selwyn (Wirral)
Tiley, Arthur (Bradford, W.)


Cunningham, Knox
Loveys, Walter H.
Touche, Rt. Hon. Sir Gordon


Currie, G. B. H.
Lucas, Sir Jocelyn
Turner, Colin


Dance, James
Lucas-Tooth, Sir Hugh
Turton, Rt. Hon. R. H.


d'Avigdor-Goidsmid, Sir Henry
McAdden, Sir Stephen
Tweedsmuir, Lady


Deedes, W. F.
McLaren, Martin
van Straubenzee, W. R,


Donaldson, Cmdr. C. E. M.
Maclean, SirFltzroy(Bute&amp; N.Ayrs.)
Vaughan-Morgan, Rt. Hon. Sir John


Doughty, Charles
Macleod, Rt. Hn. lain (Enfield, W.)
Vickers, Miss Joan


du Cann, Edward
MacLeod, John (Ross &amp; Cromarty)
Wakefield, Sir Waved


Duncan, sir James
McMaster, Stanley R.
walder, David


Elliot, Capt. Walter (Carshalton)
Macmillan, Maurice (Halifax)
Walker, Peter


Emery, Peter
Macpherson, Niall (Dumfries)
Walker-Smith, Rt. Hon. Sir Derek


Errington, Sir Eric
Maddan, Martin
Wall, Patrick


Farey-Jones, F. W.
Maginnis, John E.
Ward, Dame Irene


Farr, John
Maitland Sir John
Webster, David


Fell, Anthony
Manningham-Buller, Rt. Hn. Sir R.
Wells, John (Maidstone)


Finlay, Graeme
Markham, Major Sir Frank
Williams, Dudley (Exeter)


Fisher, Nigel
Marshall, Douglas
Williams, Paul (Sunderland, S.)


Fietcher-Cooke, Charles
Marten, Neil
Wills, Sir Gerald (Bridgwater)


Foster, John
Mathew, Robert (Honiton)
Wilson, Geoffrey (Truro)


Fraser, Ian (Plymouth, Sutton)
Matthews, Gordon (Meriden)
Wise, A. R.


Gammans, Lady
Mawby, Ray
Wolrige-Gordon, Patrick


Gardner, Edward
Maxwell-Hyslop, R. J.
Woollam, John


Gllmour, Sir John
Maydon, Lt.-Cmdr. S. L. C.
Yates, William (The Wrekln)


Glover, Sir Douglas
Mills, Stratton



Glyn, Dr. Alan (Clapham)
Miscampbell, Norman
TELLERS FOR THE NOES:


Gower, Raymond
Montgomery, Fergus
Mr. Whitelaw and Mr. Rees.


Green, Alan
Morgan, William

Mr. Speaker: The next new Clause is one which we discussed in the small hours of this morning.

New Clause.— (ONE HUNDRED PER CENT. DISABLED.)

The following section shall be added to Part VIII of the Income Tax Act, 1952:—
228A. If the claimant proves that during the whole of the year of assessment—

(a) he has been in receipt of a war disablement pension or an industrial injury pension granted by the Ministry of Pensions and National Insurance and determined by reference to one hundred per cent. disablement; or
(b) though not in receipt of a one hundred per cent. disablement pension or

industrial injury pension he nevertheless is disabled in manner and degree equivalent to one hundred per cent. disablement

he shall be entitled to a deduction from the amount of income tax with which he is chargeable equal to tax at the standard rate on one hundred pounds".— [Mr. Callaghan.]

Brought up, and read the First time.

Mr. Callaghan: I beg to move, That the Clause be read a Second time.

I move this Motion formally.

Question put,That the Clause be read a Second time:—

The House divided:Ayes 185, Noes 237.

Division No. 232.]
AYES
[7.18 p.m.


Abse, Leo
Ginsburg, David
Mapp, Charles


Ainsley, William
Cordon-Walker, Rt. Hon. P. C.
Mason, Roy


Albu, Austen
Griffiths, David (Rother Valley)
Mendelson, J. J.


Allaun, Frank (Salford, E.)
Griffiths, Rt. Hon. James (Llanelly)
Millan, Bruce


Allen, Scholefield (Crewe)
Grimond, Rt. Hon. J.
Milne, Edward


Awbery, Stan
Hale, Leslie (Oldham, W.)
Mitchison, G. R.


Bacon, Miss Alice
Hall, Rt. Hn. Glenvil (Colne Valley)
Monslow, Walter


Baxter, William (Stirlingshire, W.)
Hamilton, William (West Fife)
Moody, A. S.


Bence, Cyril
Hannan, William
Moyle Arthur


Bennett, J. (Glasgow, Bridgston)
Harper, Joseph
Mulley, Frederick


Benson, Sir George
Hayman, F. H.
Neal, Harold


Blackburn, F.
Henderson, Rt. Hn. Arthur(RwlyRegis)
Oliver, G. H.


Blyton, William
Herbison, Miss Margaret
Owen, Will


Boardman, H.
Hilton, A. V.
Padley, W. E.


Bowden, Rt. Hn. H, W. (Leics. S.W.)
Holman, Percy
Pannell, Charles (Leeds, W.)


Bowen, Roderic (Cardigan)
Hoosen, H. E.
Pargiter, G. A.


Boyden, James
Houghton, Douglas
Paton, John


Braddock, Mrs. E. M.
Howell, Charles A. (Perry Barr)
Pavitt, Laurence


Bray, Dr. Jeremy
Howell, Denis (Small Heath)
Pearson, Arthur (Pontypridd)


Brockway, A. Fenner
Hoy, James H.
Pentland, Norman


Broughton, Dr. A. D. D.
Popplewell, Ernest
Hughes, Emrys (S. Ayrshire)


Brown, Rt. Hon. George (Belper)
Hunter, A. E.
Prentice, R. E.


Brown, Thomas (Ince)
Hynd, H. (Accrington)
Price, J. T. (Westhoughton)


Butler, Herbert (Hackney, C.)
Hynd, John (Attercliffe)
Proctor, W. T.


Butler, Mrs. Joyce (Wood Green)
Irvine, A. J. (Edge Hill)
Pursey, Cmdr. Harry


Callaghan, James
Irving, Sydney (Dartford)
Randall, Harry


Chapman, Donald
Janner, Sir Barnett
Rankin, John


Cliffe, Michael
Jay, Rt. Hon. Douglas
Reid, William


Collick, Percy
Jeger, George
Rhodes, H.


Craddock, George (Bradford, S.)
Jenkins, Roy (Stechford)
Roberts, Albert (Normanton)


Cronin, John
Johnson, Carol (Lewisham, S.)
Robertson, John (Paisley)


Crosland, Anthony
Jones, Dan (Burnley)
Ross, William


Cullen, Mrs. Alice
Jones, Elwyn (West Ham, S.)
Royle, Charles (Salford, West)


Dalyell, Tarn
Jones, Jack (Rotherham)
Shinwell, Rt. Hon. E.


Davies, c. Elfed (Rhondda, E.)
Jones, J. Idwal (Wrexham)
Short, Edward


Davies, Ifor (Cower)
Jones, T. W. (Merioneth)
Silverman, Julius (Aston)


Deer, George
Kelley, Richard
Silverman, Sydney (Nelson)


Delargy, Hugh
Key, Rt. Hon. C. W.
Skeffington, Arthur


Dempsey, James
Lawson, George
Slater, Mrs. Harriet(Stoke, N.)


Diamond, John
Ledger, Ron
Slater, Joseph (Sedgefield)


Dodds, Norman
Lee, Frederick (Newton)
Small, William


Donnelly, Desmond
Lee, Miss Jennie (Cannock)
Smith, Ellis (Stoke, S.)




Snow, Julian


Dugdale, Rt. Hon. John
Lever, L. M. (Ardwlck)
Sorensen, R. W.


Ede, Rt. Hon. C.
Lewis, Arthur (West Ham, N.)
Spriggs, Leslie


Edelman, Maurice
Lipton, Marcus
Stewart, Michael (Fulham)


Edwards, Rt. Hon. Ness (Caerphilly)
Loughlin, Charles
Stones, William


Edwards, Walter (Stepney)
Lubbock, Eric
Stross,Dr.Barnett(Stoke-on-Trent,C.)


Evans, Albert
Mabon, Dr. J. Dickson
Swingler, Stephen


Fernyhough, E.
McCann, John
Taverne, D.


Fitch, Alan
MacColl, Jamet
Taylor, Bernard (Mansfield)


Fletcher, Eric
Mclnnes, James
Thompson, Dr. Alan (Dunfermline)


Foot, Dingle (Ipswich)
McKay, John (walleend)
Thornton, Ernest


Foot, Michael (Ebhw Vale)
Mackie, John (Enfield, East)
Tomney, Frank


Forman, J. C.
McLeavy, Frank
Wade, Donald


Fraser, Thomas (Hamilton)
MacMillan, Malcolm (Western Isles)
Warbey, William


Gaitskell, Rt. Hon. Hugh
MacPherson, Malcolm (Stirling)
Watkins, Tudor


Galpern, Sir Myer
Manuel, Archie
Weitzman, David




Wells, Percy (Faversham)
Williams, D. J. (Neath)
Woof, Robert


Wells, William (Walsall, N.)
Williams, LI. (Abertillery)
Wyatt, Woodrow


White, Mrs. Eirene
Williams, W. R. (Openshaw)
Zilliacus, K.


Wilkins, W. A.
Willis, E. G. (Edinburgh, E.)



Willey, Frederick
Winterbottom, R. E.
TELLERS FOR THE AYES:




Mr. Redhead and Mr. Grey.




NOES


Agnew, Sir Peter
Glyn, Dr. Alan (Clapham)
Maxwell-Hystop, R. J.


Allason, James
Gower, Raymond
Maydon, Lt.-Cmdr. S. L. C.


Amery, Rt. Hon. Julian
Green, Alan
Mills, Stratton


Arbuthnot, John
Gresham Cooke, R.
Miscampbeil, Norman


Atkins, Humphrey
Grosvenor, Lt.-Col. R. C.
Montgomery, Fergus


Balniel, Lord
Gurden, Harold
Morgan, William


Barber, Anthony
Hall, John (Wycombe)
Mott-Radclyffe, Sir Charles


Barlow, Sir John
Hamilton, Michael (Wellingborough)
Nabarro, Gerald


Batsford, Brian
Harris, Frederic (Croydon, N.W.)
Nicholls, Sir Harmar


Baxter, William (Stirlingshire, W.)
Harris, Reader (Heston)
Nicholson, Sir Godfrey


Beamish, col. Sir Tufton
Harrison, Brian (Maldon)
Noble, Michael


Bell, Ronald
Harrison, Col. Sir Harwood (Eye)
Nugent, Rt. Hon. Sir Richard


Bennett, F. M. (Torquay)
Harvey, John (Walthamstow, E.)
Oakshott, Sir Hendrle


Bennett, Dr. Reginald (Goe &amp; Fhm)
Harvie Anderson, Miss
Orr, Capt. L. P. S.


Berkeley, Humphry
Hastings, Stephen
Osborn, John (Hallam)


Bevins, Rt. Hon. Reginald
Hay, John
Page, Graham (Crosby)


Bidgood, John C.
Heald, Rt. Hon. Sir Lionel
Page, John (Harrow, West)


Biffen, John
Henderson, John (Cathcart)
Panned, Norman (Kirkdate)


Biggs-Davison, John
Hendry, Forbes
Pearson, Frank (Clitheroe)


Birch, Rt. Hon. Nigel
Hicks Beach, Maj. W.
Peyton, John


Bishop, F. P.
Hiley, Joseph
Pickthorn, Sir Kenneth


Black, Sir Cyril
Hill, Mrs. Eveline (Wythenshawe)
Pitman, Sir James


Bossom, Clive
Hill, J. E. B. (S. Norfolk)
Pitt, Miss Edith


Bourne-Arton, A.
Hirst, Geoffrey
Pott, Percivall


Box, Donald
Hobson, Sir John
Price, David (Eastleigh)


Boyd-Carpenter, Rt. Hon. John
Hocking, Philip N.
Proudfoot, Wilfred


Boyle, Sir Edward




Brewis, John
Holland, Philip
Pym, Francies


Brooke, Rt. Hon. Henry
Hornby, R. P.
Ramsden, James


Brown, Alan (Tottenham)
Hornsby-Smith, Rt. Hon. Dame P.
Redmayne, Rt Hon Martin


Browne, Percy (Torrington)
Howard, Hon. C. R. (St. Ives)
Rees, Hugh


Bryan, Paul
Howard, John (Southampton, Test)
Ridley, Hon. Nicholas


Buck, Antony
Hughes-Young, Michael
Robinson, Rt. Hn. Sir R. (B'pool, S.)


Bullard, Denys
Hulbert, Sir Norman
Roots William


Bullus, Wing Commander Eric
Iremonger, T. L.
Russell, Ronald


Burden, F. A.
Irvine, Bryane Godman (Rye)
Sandys, Rt. Hon. Duncan


Butcher, Sir Herbert
Jackson, John
Seymour, Leslie


Campbell, Sir David (Belfast, S.)
James, David
Sharples, Richerd


Campbell, Gordon (Moray &amp; Nairn)
Johnson, Dr. Donald (Carlisle)
Shaw, M.




Shepherd William


Carr, Compton (Barons Court)
Johnson, Eric (Blackley)
Skeet T H M


Carr, Robert (Mitcham)
Jones, Rt. Hn. Aubrey (Hall Green)
Smith Dudley (Br'ntf'd &amp; Chiswick)


Channon, H. P. G.
Joseph, Sir Keith
Smithers, Peter


Chataway, Christopher
Kerans, Cdr. J. S.
Spearman, Sir Alexander



Kerby, Capt. Henry



Chichester-Clark, R.
Kerr, Sir Hamilton
Stanley, Hon. Richerd


Clark, William (Nottingham, S.)
Kershaw, Anthony
Stevens, Geoffrey


Cleaver, Leonard
Kimball, Marcus
Stodart, J. A.


Cole, Norman
Kirk, Peter
Stoddart-Scott, Col. Sir Malcolm


Cooke, Robert
Lagden, Godfrey
Storey, Sir Samuel


Cordeaux, Lt-Col. J. K.
Langford-Holt, Sir John
Studholme, Sir Henry


Cordle, John
Leather, Sir Edwin
Summers, Sir Spencer


Costain, A. P.
Legge-Bourke, Sir Harry
Talbot, John E.


Coulson, Michael
Lewis, Kenneth (Rutland)
Taylor, Sir Charles (Eastbourne)


Craddock, Sir Beresford
Lilley, F. J. P.
Taylor, Edwin (Bolton, E.)


Critchley, Julian
Linstead, Sir Hugh
Taylor,Frank(M'ch'st'r, Moss side)


Cunningham, Knox
Litchfield, Capt. John
Taylor, W. J. (Bradford, N.)


Currie, G. B. H.
Lloyd, Rt. Hon. Selwyn (Wirral)
Teeling, Sir William


Dance, James
Loveye, Walter H.
Thomas, Leslie (Canterbury)


d'Avigdor-Goldsmid, Sir Henry
Lucas, Sir Jocelyn
Thomas, Peter (Conway)


Deedes, W. E.
Lucas-Tooth, Sir Hugh
Thompson, Kenneth (Walton)


de Ferrantl, Basil
McAdden, Sir Stephen
Thompson, Richard (Croydon, 8.)


Donaldson, Cmdr. C. E. M.
MacleanSrrFitzroy(Bute&amp;N.Ayrs.)
Tlley, Arthur (Bradford, W.)


Doughty, Charles
Macleod, Rt. Hn. lain (Enfield, W.)
Touche, Rt. Hon. Sir Gordon


du Cann, Edward
MacLeod, John (Ross &amp; Cromarty)
Turner, Colin


Duncan, Sir James
McMaster, Stanley R.
Turton, Rt. Hon. R. H.


Elliot, Capt. Walter (Carshalton)
Macmiltan, Maurice (Halifax)
Tweedsmulr, Lady


Emery, Peter
Macpherson, Niall (Dumfries)
van Straubenzee, W. R.


Errlngton, Sir Eric
Maddan, Martin
Vaughan-Morgan, Rt. Hon. Sir John


Farey-Jones, F. W.
Maginnis, John E.
Vickers, Miss Joan


Fell, Anthony
Maitland, Sir John
Wakefield, Sir Wavell


Fisher, Nigel
Manningham-Buller, Rt. Hn. Sir R.
Walder, David


Fietcher-Cooke, Charles
Markham, Major Sir Frank
Walker, Peter


Fraser, Ian (Plymouth, Sutton)
Marshall, Douglas
Walker-Smith, Rt. Hon. Sir Derek


Gammans, Lady
Marten, Neil
Wall, Patrick


Gardner, Edward
Mathew, Robert (Honiton)
Ward, Dame Irene


Gilmour, Sir John
Matthews, Gordon (Merlden)
Webster, David


Glover, Sir Douglas
Mawby, Ray
Wells, John (Maidstone)







Whitelaw, William
Wilson, Geoffrey (Truro)



Williams, Dudley (Exeter)
Wise, A. R.
TELLERS FOR THE NOES:


Williams, Paul (Sunderland, S.)
Wolrige-Gordon, Patrick
Mr. Finlay and Mr. McLaren.


Wills, Sir Gerald (Bridgwater)
Woollam, John

Clause.— (INCREASE OF INVESTMENT ALLOWANCES FOR SCIENTIFIC RESEARCH EXPENDITURE.)

There shall be an increase of investment allowances in respect of scientific research expenditure; and accordingly subsection (6) of section sixteen of the Finance Act. 1954 (which provides for such allowances to the amount of one-fifth of the expenditure on the construction of buildings or works or the provision of new machinery or plant), shall have effect with the substitution of the word "three-tenths" for the word "one-fifth".[Mr. Mitchison.],

Brought up, and read the First time.

Mr. Mitchison: I beg to move, That the Clause be read a Second time.
There is already an investment allowance in respect of expenditure on scientific research which relates to expenditure of a capital character in the construction of buildings or works or the provision of new machinery or plant for the purposes of scientific research. By reference to the Income Tax Act, 1952, one has a definition of scientific research and a relation of it to the trade or business being carried on by the taxpayer.
This is the subject which we are now discussing, and the object of the new Clause is simply to increase the present investment allowance by one-half. The point of the new Clause is the importance of scientific research expenditure and the question is whether this ought to be recognised and such expenditure fostered by a tax concession at this stage.
In comparison with what is happening in other countries, production in this country has been moving forward remarkably slowly, or, as is the case at present, staying put, and we are losing ground in the international production race, if it can be so called. There is a general feeling in the country, I think, that the application of modern discoveries is neglected at present. It is not that the discoveries are not made, but that there is a continuing gap between research work and its application.
7.30 p.m.
The object of an allowance of this sort, or of an increase in it, is to induce private industry to take steps to apply research and to conduct research on its

account. On that, and I am still talking about capital research, there are some interesting figures and conclusions. The first document to which I should like to refer is the Report of the Advisory Council on Scientific Policy for 1959– 60. That Report came out in October, 1960. There has been a more recent one, but this happens to contain the information that I want to mention.
The Advisory Council sought to compare the progress of research and the amount of the gross national product spent on it in this and some other country, and the only country which it was able to find and which it regarded as comparable was the United States. The figures are given on page 6 of the Report (Cmnd. 1167), and, without going into them in detail, they show that, roughly speaking, the percentage of the gross national product employed on research and development in this country and in the United States was not very different.
A slightly larger percentage was employed in the United States, but what is striking is that when we come to compare the percentage of the contribution by industry to that expenditure we find that the United States contributes a very considerably larger proportion. If we take it in terms of percentages, it is 28½ per cent. in this country and 36½ per cent. in the United States, a quite startling difference when one remembers that this is the only comparison that the Advisory Council has been able to make.
The same thing appears in other ways, too. In a later Report, one which came out fairly recently, in January, 1962, and which relates to the period 1960– 61, there is a certain amount on the same lines, always, I think— I hope I am summarising it fairly— pointing to the conclusion that, while there is some progress, the real difficulty is to get it over, so to put it, to private industry and to make private industry take its own share in the development that ought to be going on.
That is a very broad generalisation, and there is no doubt that it differs very considerably, not only between one industry and another, for in some industries a


very great deal is done by the industry, even in a collective form or by large individual firms in it, while in other industries very little appears to be done. There is a similar difference, again, and this is particularly relevant to this new Clause, between the position of large firms which, by and large, are very much better about this sort of thing, and medium and small firms, which in many, if not in most, industries are not doing anything like as much as they should.
It may be said, of course, that that is all very well, but that is exactly what is to be expected. That may be, but it is also true that in the case of the one available comparison, that with the United States, the effort made by industry in this matter appears to be considerably larger, not merely in absolute terms but also in relation to the effort as a whole and to the gross national product. That being so, there seems to be a distinct case for fostering research and the application of research in industry.
I should like to take one instance. The Federation of British Industries, a short time ago, produced a report on industrial research in manufacturing industry which is a little older. It relates to the period 1959– 60, and it came out in December of last year. Again, without going into details, it came to the conclusion which I have just put— that there are very serious deficiencies, partly in some industries and partly in the case of medium and small firms rather than large firms in a good many industries. For the subject which we are discussing tonight, we need not go much further than that. It represents a great deal of careful sampling and a large number of answers to questions, and it shows clearly that the Federation itself is distinctly conscious that there is something lacking in the effort that is being made.
I suppose that the next question one has to put is this. That may be so, but is this the right way of fostering research in industry? I should be the first to acknowledge that, while on the whole I still regard the contributions made by the Government in this direction as insufficient, there has been a very considerable increase in recent years in the amounts which in one form or another the Government have contributed towards this end. For instance, that

appears in the recent Report of the D.S.I.R., and that Report indicates a number of ways, many of them new ways, in which attempts are being made to foster the same thing— the development and the application of research in private industry.
It is rather interesting to see in that last Report that recently the Department held a conference. It mentions this conference particularly, and it occupies some space in the Report. It was held in April, 1961, and it was to discuss the gap between research results and their industrial application. I have inquired about the conference, and it apparently was of a confidential character, and the discussions and conclusions are not generally available. I could hardly quote them, even if I knew what they were, but the choice of subject is very significant and very relevant to what we are trying to urge upon the Government now— that there is a case for a special effort here.
I would simply say that it is no answer, when we are discussing a taxation question of this sort, to say that quite a lot is being done in other fields towards the same end. The question we have to consider today is whether an investment allowance which was fixed in 1954, and which, I believe, in this case, has not been altered since, is still sufficient, in view of the difficulties which have arisen since then— difficulties in increasing production, and it is generally recognised by all these bodies that they are rather difficult to quantify, difficulties in the application of research in aid of industry, and therefore in aid of production itself.
I have a feeling that we are slipping back in this respect particularly badly, and that the efforts which are being made in this country, though I recognise that these efforts are considerably greater than they were a little time ago, are still insufficient by comparison with other countries. I have quoted the one available comparison, and it would waste the time of the House if I tried to draw any others, but I believe that it is possible to make broadly similar comparisons with a number of countries in Western Europe; for instance, both France and Western Germany.
When we are considering the question of taxation in this field, we should remember that this investment allowance was fixed before the nature and size of this problem was fully apparent. It has become apparent. It is now recognised both by the scientists advising the Government and by such bodies as the Federation of British Industries, and I hope that it is recognised by the Government. In these circumstances it would be right to give this measure of fiscal encouragement.
If we are to be told that it will cost this or that much, my answer is simply that it may look like that on paper but we shall more than get it back in meeting the major difficulties of the country and in making a contribution not only towards increased production, but towards what I hope we all want at the end of it, that is, the application for the benefit of the ordinary man, his standard of living, his safety, his health and his general advancement, of the scientific discoveries which we know are being made in increasing numbers and which are of increasing importance in this changing world.

Mr. Austen Albu: I want, briefly, to support my hon. and learned Friend the Member for Kettering (Mr. Mitchison). Perhaps one of the most extraordinary things in recent years has been the movement of the Tory Party towards the recognition of the part the Government have to play in the development of industry and the encouragement of industrial change. Speeches are heard from the benches opposite, even from Ministers, advocating Government intervention to make industry more scientific, advocating Government financial support and, even in reply to a recent Question, advocating Government participation, if necessary, in private industry.
We all know the reason for this. It is because of the very substantially changed position of this country in the industrial world, a change which ought to have been recognised long ago and which was recognised by somebody rather remotely related to my hon. and learned Friend the Member for Kettering at the beginning of the century, but of which we have to be continually reminded almost every ten or fifteen years. The change which has been taking place

in the position of the British economy and industry is not a new one. Now we are up against it in its full force. The only real hope for the economic future of this country is if we have an industry subject to continuous change to meet the changing economic and technological development in the world.
We frequently hear demands in this Chamber from both sides for a greater degree of investment. We on this side are very much in favour of an expanding economy and much greater industrial investment, but I have for long felt that we must not always assume that all investment is necessarily good investment. We on this side have always stood for a measure of direction or control of investment, and certainly a measure of selective incentives to investment. We have moved Amendments or new Clauses to Finance Bills year after year to encourage investment in particular fields.
7.45 p.m.
What this country mainly needs at present is investment in innovation. We have continually to be producing, as I have frequently said over the last ten years, goods which, on the whole, other countries cannot make. That is a gross exaggeration, I know, but it is roughly the way we have to go. Therefore, the Government should certainly employ every method they can to encourage industries in industrial innovation, both in products and in processes. This applies, first, in the technically advanced industries. We certainly want them, even though it may not appear at the moment to be particularly profitable, to develop methods and processes the profitability of which may be very far in the future.
It applies, secondly, to the traditional old craft industries which, if they are to continue to survive in the modern world, will have to change their methods from those of the craftsman to those of the scientist. It applies, thirdly, as was brought out in the Report of the F.B.I., to what I might call the intermediate industries, mostly the engineering industries. They sprang up out of the crafts, and I regret to say that some of them never got past the crafts.
This is to be seen in many branches of the engineering industry, particularly in mechanical engineering. We have


already had a number of D.S.I.R. reports on, for instance, machine tools and ship- building. I believe that the D.S.I.R. is now studying textile machinery. There are several other branches of mechanical engineering which certainly remain, I regret to say, in the George Stephenson age.
I regret to say that the railways have remained there. If one wants to see what can happen when industries get them-selves bogged down in traditional methods, one only has to look at the railways. I am being quite impartial. Whether it is a nationalised industry or a private industry, the same thing can happen if it remains steeped in tradition.
One of the great advantages of encouraging research and development in industry is not only for the sake of the research itself. It is not only that it will encourage the development of new products and new processes. What it can also do— perhaps this is even more important in many branches of British industry— is to encourage, if it is properly developed, if the research and development are properly integrated, a scientific attitude in the industry itself.
Where there are good research and development departments which are not stuck away in a country house miles away so that the engineers and managers do not have any contact with them, and where there is close contact between the research and development departments and the management, there will be a scientific industry which is not only scientific in its products and processes, but also in things like market research, industrial relations, organisation, and so on.
This is badly needed in British industry. We need a far more professional attitude than we have at present in many branches of industry. This would be encouraged by the further encouragement of research and development departments. I come back, again being impartial, to the nationalised industries. If we compare the difference between the railways and what has been taking place, in recent years in the electricity industry, we can see what I mean. What- ever else Dr. Beeching may be doing, I hope that one thing he will do will be to bring some of this scientific attitude into the railway industry.
We must have close contact between the research and development people and those responsible for design, management and sales and everything else. If they are separate, and if the research and development people are looked upon as backroom boys not to be touched and who will not dirty their hands by coming into contact with those who are doing the immediately profitable side of the business— although I agree that research and development are profitable in the end— I do not think that the results will be very good. But the encouragement of research and development in industry, if properly done, is likely to make industry more scientific.
It is for that reason, as much for any other, that I support the Clause. As my hon. and learned Friend said, the Government have done a little more in recent years, forced by circumstances and also by Communism. I shall never forget how the Government woke up to the whole problem when their most distinguished figure got up one day on the Front Bench below the Gangway and pointed out what the Russians were doing. That set everybody going. There is nothing like the fear of what the Russians are doing to get Governments willing to spend a lot of money on science and on research and development. When the right hon. Member for Woodford (Sir W. Churchill) made that speech about what the Russians were doing, although some of us had been saying it for years, the Government acted as though somebody had stuck a pin into them. In particular, they got going in the field of technical education.
This is nothing to do with the Russians, the Americans or anybody else. It concerns what will happen to this country and whether it can keep its industry sufficiently ahead of the rest of the world to maintain a standard of living based not upon the sale of the products of semi-skilled workers, but upon the sale of the products of highly skilled technicians.
I do not know whether the Government are serious in this. They have not shown great signs of it yet, although some hon. Members on the Government back benches make very strong speeches. The right hon. Member for Birmingham, Hall Green (Mr. Aubrey Jones) is one


such Member. I sometimes wonder why he is in the Conservative Party at all, because some of the speeches he makes show that he is a very enlightened man. Nevertheless, this attitude does not seem to have got to the Treasury Bench yet. This is not surprising, because there is hardly anybody in the Treasury who understands these things.
I know that the Financial Secretary, who is to reply, has some understanding of this problem. He has many craft industries in his own constituency. I hope that on this occasion we shall have a little more flexible reply. This is a problem of great importance. I hope that he can tell us something really helpful.

Mr. Ede: I thank my hon. and learned Friend the Member for Kettering (Mr. Mitchison) for the last few sentences of his speech, because they bring us back to the origin of the modern world, When Sir Francis Bacon defeated the school men in the universities and insisted on the discussion of real things in argument and their application to the daily lives of the people. That is the only real basis on which we can continue the kind of work which my hon. and learned Friend was advocating.
To regard this as a purely economic question which will enable a few manufacturers to make the sort of profits which they made in the latter part of the eighteenth century is to look at it in entirely the wrong way. This research should be directed at securing for the ordinary people the benefits of all the improvements which can be made in our methods of manufacture and at a wider utilisation of the skills of the community.
There has recently been on the Third Programme a series of talks by Mr. Christopher Hill, who is, apparently, a leading light in one of the major Oxford colleges, on the cause of the great intellectual movements of the seventeenth century which led to the Civil War in this country and to the establishment of a system of Government which had to pay attention to the needs of industry and of the advancing claims of craftsmen for recognition. There was a particularly interesting lecture in this

series pointing out that Sir Walter Raleigh did not go to the mathematicians of the universities, such as they were in those days, but cal led on the navigators with whom he had been associated to build up the maritime life of the country.
Research is not an end in itself. It presents the opportunity for applying to the lives of ordinary people all the resources which science can provide to make Life more tolerable. Prior to the early seventeenth century education was devoted to the pessimism which came from a belief in the fall of man. The scientists who followed Bacon realised that man by himself could so improve his own surroundings that he could make something which had hope in it and which would enable people to realise that they had not been damned irretrievably by something Which was alleged to have happened in the Garden of Eden.
As my hon. and learned Friend the Member for Kettering put it, let us recognise that we have a greater opportunity today than ever before and that the new scientific urge in the universities should be used not merely for the working out of high falutin' theories, but for the application of discoveries to the lives of ordinary men and women.
One of the chief joys which I have in life is in recollecting what the universities used to say about Government money in the early years of this century and the way in which they now lap it up, turn round and ask for more. We live in a revolutionary age, and the best of it is that the school men are again being defeated by the practical needs of our age.

Mr. Ellis Smith: I support strongly the new Clause. The large industrial establishment in which I served my time and spent a great deal of my life spent more on research prior to the last war than almost all British industry put together. I cannot thank enough the men in that large industrial establishment with whom I was associated for the encouragement which they gave me. It produced Sir John Cockroft and Dr. Alibone, who, in the early days, worked with Professor Rutherford and others at Manchester University and at the Manchester College of Technology. Men who manage large


industrial establishments of that character, particularly in those difficult days, grow with experience and become big men. It is that type of man Which is now required to handle the affairs of this country if it is to hold its own in the new world, with its new alignment of forces.
I derive great satisfaction from that industrial background and I should like to make a few observations on the experience which I have derived from the privilege of working with those men. Because of business management of the most efficient character and because they embarked on large expenditure on research they were able to hold their own in keen competition throughout the world and to provide the Russians with the technical knowledge, drawings, and experience of management from which they derived a great income. This country benefited to the extent of thousands of pounds from the turbine factory in Leningrad, which is there to this day.
They have been engaged in the export trade since the end of the war to a very great extent, and, as a result, have made an enormous contribution to Britain's economy. There are great 'lessons to be learned from the few observations which I am making because, as sure as I am standing here, if British industry had a modern outlook of that character, and was prepared to embark on expenditure to enable it to carry out research of that description, it would be in a much stronger position than it is.
I hope that the Government will note what my right hon. and hon. Friends have said tonight. If they cannot accept the new Clause, or something similar to it, then I hope that what has been said will be considered and appropriate action taken on it as soon as possible.
I do not wish to carry what I have to say too far, because I should be inclined to be critical and to let a touch of the bitterness which is contained within me assert itself. I come from one of the largest industrial areas not only in this country, but in the world. We have benefited from research and were in the forefront of the development of synthetic fibres, As a result of capital being sunk in Japan and other countries, they are exporting large quantities of synthetic fibres, but, had this country taken advantage of industrial research in the

early days to the extent that it could have done, its export trade would have benefited even more. We were almost the first in the field in the development of nylon, terylene and other synthetic fabrics. I am not making our claim too high, because I know that du Pont, in America, and other similar firms, were also early in the field. But a number of firms which I could mention were early in the field of large-scale research expenditure which is being carried out in their establishments.
8.0 p.m.
The great lesson to be learned from this short debate is that it is now time that the Government took the initiative in stimulating expenditure of this kind by giving an incentive and stimulating large industrialists to embark on more financial expenditure on research. I am the first to give credit where it is due. I admit that the Board of Trade and a number of other Government Departments and committees have already made a contribution towards getting industrialists to do more in this way.
I think, however, that the time has come when the Treasury Ministers and those associated with them, should take the initiative by holding large-scale conferences to stimulate more interest in research so that we can play an even bigger part in the life of our country. We must encourage research more than we have done in the past. What my hon. and 'learned friend has said is a step in the right direction, and I hope that it will receive the sympathetic consideration of the Financial Secretary.

Mr. R. W. Sorensen: I do not intend to intervene for more than a few moments, but I do so to support the appeals which have been made on this side. Quite obviously, the suggested substitution of "three-tenths" for "one-fifth" will not make all that difference. I think that it is more in the nature of a symbol that my hon. Friends have supported this new Clause. Their speeches and the Clause have a very distinct value.
I have been pleasantly surprised at the latitude of the debate that has prompted a very characteristic and valuable dissertation from my right hon. Friend the Member for South Shields (Mr. Ede) which has brought us into


theology and history. All his speeches in this House are, of course, informative as well as inspiring. I think that he will agree that whatever may be the value of historical research and our heretical theological opinions the great need of the world today is scientific, not in the abstract and academic sense, but in the applied sense.
While this country stands pre-eminent in the number of scientific inventions, nevertheless it falls far below the highest mark when it comes to applying those inventions. It has lagged behind constantly, but we must not in any way despise the credit which is ours, and rightly so, for discovering far more than perhaps the Russians seem to recognise. But there is this gap between, on the one hand, invention, and, on the other, application.
I recall Dean Swift's famous aphorism to the effect that the man who could make two blades of grass grow where one did before deserved more of posterity than the whole race of politicians put together. That may be a reflection on all of us here, but at the time that he said that it must have had a very startling effect. Yet how true it is. Although by legislation in this House and another place we have ameliorated the lot of the poor and secured the better distribution of wealth, in the end the real need in the world and for our own country is ever greaterper capitaproduction. We have been able by scientific application not only to make two blades of grass grow where one grew before, but many scores of blades of grass to appear.
Over the past one hundred years we have revolutionised economic life. Until scientific developments were applied to our industrial and agricultural production it was true to say that broadly speaking the physical lot of man was more or less the same; that is to say, it was a struggle to produce enough to eat and in many communities it was impossible to provide for most more than bare subsistence. This is not so today. Today, in a large way, by the application of scientific knowledge, we can potentially solve the problem of production. I say "potentially", because I do not want to exaggerate.
Although the purport of this Clause is its symbolic value, we must fully acknowledge what has been done both publicly and privately. Many firms are increasingly devoting a larger proportion of their income to research of an applied nature. I am glad to know that in the universities this research is also proceeding and that some colleges of our universities are becoming more absorbed in this very important aspect of our social life. This is also the case in America, where sometimes they reach extremes. Instead of decrying or despising this activity, we should welcome it as dealing with this basic human problem of production.
There is no hope for mankind anywhere unless greater production can be achieved. Although there may have been great exploitation of backward people, the real cause of their poverty was lack of real wealth. It is, therefore, necessary that we should concentrate on applied research so that we can increase the volume of wealth made available, although not neglecting the other aspect of it— that is, to see that the greater volume is more equitably distributed.
I have very great pleasure in supporting the pleas that have been made and although I have very little experience of industry myself I can say with my right hon. Friend that these are days when the most moral thing to do is to see that production increases for the benefit of all mankind. If the new Clause is accepted it will cause very little expense to the Treasury, but at least it will be another means of upholding a symbol and recognising that in applied science lies one hope of mankind.

Sir E. Boyle: This has been an extremely interesting debate and a well-informed visitor to our proceedings on the Finance Bill would very likely think, if he came into the House at this moment, "They are discussing something both interesting and important". and he would be perfectly right.
The object of the Clause is to increase the investment allowance in respect of scientific research expenditure on the construction of buildings or works or on the provision of new plant and machinery by one-half, from 20 per cent. to 30 per cent. If I deal tonight, as I shall do for most of the time, with facts and details about our capital


allowances, it is not because I have not profited from the extremely interesting speeches which we have heard on the general subject.
No one underrates the importance of scientific research, not only to our economy but to our national life in general. I think that I agree with nearly all that was said by the hon. Member for Edmonton (Mr. Albu), but I did not quite agree with him when he said that I should have some interest in this subject because I represent a number of workers in craft industries. I welcome the work of craft industries in Birmingham as much as anyone— some very fine silver work is carried on. I am aware of what Birmingham contributes to the balance of payments by the exploitation of new inventions. But I am bound to say that occasionally the outlook on craft industries has led to a slightly backward-looking attitude in British industry.
It is somewhat depressing but true to realise how much the development of new inventions in the industrial Midlands has so far owed to the inspiration of the needs of the defence programme. It is, for example, true that no aeroengine for a number of years was ever sold for work in civil aircraft which had not first been tried out in military aircraft. It is extremely important that we should realise the importance of scientific progress for its own sake and not just in connection with defence.
I agree with much of the speech of the right hon. Member for South Shields (Mr. Ede), but I am not at all sure that some modern school men in pursuit of truth and learning for its own sake may not sometimes, as they did in the sixteenth century and earlier, make a bigger contribution to technical efficiency than we realise.

Mr. Ede: So long as they repudiate Aristotle as the source of all scientific knowledge.

Sir E. Boyle: I agree. I said yesterday that I thought that the essentialist theory of definitions was one of the worst human errors, but the hon. Member for Cardiff, South-East (Mr. Callaghan) rebuked me, saying that my remarks suggested that I did not know the Clause we were discussing. I did not think that

that was quite fair, although I saw the force of the point he made.
I come now to this new Clause, and I would remind the House that scientific research expenditure is already treated very favourably from the tax point of view. There are three allowances for capital expenditure on scientific research. First, there is the investment allowance of 20 per cent. Secondly, there is the first year allowance of 60 per cent. given at the same time as the investment allowance. Thirdly, there are four further allowances, given in each one of the next four years, of 10 per cent. of the total expenditure.
This means that 80 per cent. of capital expenditure on scientific research is allowed in the first year— that is to say, under our normal preceding year basis of assessment, the first year means the year after that in which the expenditure was actually incurred. On that definition, 80 per cent. is allowed in the first year and a further 40 per cent. is allowed equally over the next four years, so that the total of 120 per cent. is allowed over five years.
There is no question that the capital allowances for scientific research expenditure compare very favourable, quite rightly, with allowances given generally for capital expenditure on industrial buildings, or ordinary capital expenditure on industrial buildings, plant or machinery. In the case of industrial buildings, the first year allowance for scientific research expenditure is, as I have already explained, 80 per cent., but the first year allowance given for ordinary capital expenditure on industrial buildings is only 17 per cent., so that there is a big difference. That 17 per cent. is made up of an investment allowance of 10 per cent., an initial allowance of 5 per cent., and a first annual allowance of 2 per cent.
8.15 p.m.
With plant and machinery, again the first year allowance for scientific research expenditure is 80 per cent., but the first year allowance of ordinary capital expenditure is 42½ per cent. and there is an investment allowance of 20 per cent. plus an initial allowance of 10 per cent. and a first annual allowance that normally averages 12½ per cent.
I have been dealing with the first year so far. If one considers the next two years, then taking the investment allowance into account— it is really a sort of bonus— the whole of any scientific research expenditure, both on buildings and on plant, will have been allowed. In other words, the figure is 100 per cent. if we take the next two years as well as the initial year. That compares with 26 per cent. for other industrial buildings and about 60 per cent. for other plant and machinery.
If one considers the position after five years, by then 120 per cent of scientific research expenditure will be for buildings and 74½ per cent. for other plant and machinery. I make that point to show that scientific research expenditure on industrial buildings, plant and machinery is very favourably treated in our tax system.
The only thing that at first sight is treated more favourably is capital expenditure on ships. It is true— if I may draw the comparison which is sometimes made— that ships get an investment allowance of 140 per cent., but as against this the 120 per cent. allowed for scientific research expenditure is given over five years, whereas the 140 per cent. for ships is given over 20 years.
Because this is, quite rightly, a subject which is in the minds of a good many people outside and inside this House, I have looked up the position in other O.E.C.D. countries, in order to see how our practices compare. It is true that a few countries allow some capital expenditures on scientific research to count as a trading expenditure, but the ultimate tax treatment, even in those countries, is less favourable than our own. Furthermore, in all these countries, with the possible exception of Norway, a fairly narrow view is taken of the expenditure which qualifies.
I hope that I shall not have to apologise for what I am about to say, but in Canada, where, I would have thought, expenditure of this kind is fully as important as it is to us, it is only expenditure on what is described as "draft research programmes" which qualify, and in Germany only expenditure on what is defined as "fundamental research." In the United States, capital expenditure may be deducted at once as

a trading expense provided that the asset has no determinable useful life. I am bound to say that I think that that, from the administrative point of view, is not an easy system to work.
When scientific research expenditure is not allowed as a trading expense, a few countries, including Italy and the Benelux States, do grant investment allowances but the scope or availability of these allowances is considerably limited compared with our own, and in none of these cases is the first year treatment as favourable as in Britain.
Incidentally, Britain is the only O.E.C.D. country, apart from Germany, which writes off scientific research expenditure at specially accelerated rates. In Germany, there is a four year spread, but there are no investment or initial allowances there, so that the British system is more generous than the German system in the first year.
I have deliberately gone at length into this because it is important. My right hon. and learned Friend has considered this matter very carefully, but he does not think that he would be justified in asking the House to accept this Clause, for three reasons. The first is a reason which I have already implied— that the investment allowance for scientific research expenditure, taken with the special first year allowance and the annual allowance, already provides a very substantial inducement to expenditure on research buildings, plant and machinery. We treat this kind of capital expenditure more favourable in the short term than we treat expenditure on any other class of capital asset.
Secondly— and this is really the point made by the hon. Member for Leyton (Mr. Sorensen), whom I am sure we all warmly welcome to this debate, and it is a fair one— it is doubtful whether a special investment allowance of 30 per cent. compared with 20 per cent., which would mean simply that 90 per cent. of the expenditure rather than 80 per cent. was allowed in the first year, and 130 per cent. rather than 120 per cent. over five years, would really have any significant influence in inducing investment beyond what would in any case have been undertaken. I know that that is the view of my noble Friend the Minister for Science, whom we have naturally consulted.

Mr. Sorensen: What would it cost if the Amendment were accepted?

Sir E. Boyle: The cost would be £ 1½ million in a full year. I am not tonight arguing my case on grounds of cost, though, as one inevitably must, I find myself a little doubtful whether we could stop here; whether there might not be some increased pressure to increase this allowance in other spheres.

Mr. Mitchison: If an extra 10 per cent, costs£1½ million, the total amount of this allowance would appear to be £ 15 million a year. Has it been increasing or decreasing in recent years?

Sir E. Boyle: I cannot offhand give the hon. and learned Gentleman the figure, but it certainly has been increasing. I propose to give some more figures about expenditure which I think will show that that must be so since the allowance came in in 1954 because, as hon. Gentlemen opposite have rightly said, this allowance was not suspended when the initial investment allowance in general was suspended in 1956. This allowance is costing more than it did when it was first brought in.

Mr. Mitchison: I asked about the position in recent years.

Sir E. Boyle: I do not believe that the figures are available. I am coming to the survey which is now being made.
The third point that we have to remember is that, apart from the tax treatment of scientific research expenditure, the Government have tried to stimulate scientific research in industry by a number of means. I agree with hon. Gentlemen opposite. I think that there has been some change in the climate, and I very much welcome this. I forgot who first stated the doctrine, but it may have been Keynes who said that the proper job of Government was not to try to do those things which are already being done and to try to do them better, but to do those important things that otherwise do not get done at all.
There are two examples which I propose to give, and others could be quoted. The Government have encouraged the growth of the research association system. Over 50 co-operative research associations now belong to the Government scheme, with a combined expenditure of £ 8½ million last year compared

with less than £ 5 million in 1955– 56. Again, the Government have encouraged firms to use the unique facilities of the D.S.I.R. stations. The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) rightly mentioned the D.S.I.R. We have encouraged firms to use its facilities either by co-operating with the stations and sharing the cost, or by having work done by the stations at their expense.
We certainly should not rest content with the present level of scientific research and development in industry at a time of growing international competition and rapid technological change, but I think it is worth remembering that between 1955 and 1958 private industry in the United Kingdom doubled its expenditure on research and development financed from its own resources. The figures are, respectively, £ 68 million in 1955 and £ 136 million in 1958. An inquiry is now going on into the figures for 1961. The figures for 1958 are the latest available.
As I said, my right hon. and learned Friend, taking into account what is already being done to encourage capital expendiure on scientific research, feels that he could not advise the House to accept the new Clause, and, for the reasons which I have given, I doubt whether it would prove so effective in its operation as one might at first sight suppose. I doubt whether it would in fact make very much difference, but I give the House this assurance. The Government, rightly pressed from both sides of the House, clearly see the importance of capital expenditure on scientific research, and as and when we come to look again at the whole system of capital allowances in this country— and this is part of a very important field— we shall bear very specially in mind this kind of capital expenditure, and I think the very fact that this investment allowance has never been suspended is a sign of the importance which the Government attach to the subject which has rightly attracted the attention of the House this evening.

8.30 p.m.

Mr. Mitchison: If I may with the leave of the House speak again, I would say the hon. Gentleman the Financial Secretary has made an excellent case for increasing the demand which we are making, and in


these circumstances I feel sure that he will support us when we go into the Lobby to urge it on the Government.

Question put,That the Clause be read a Second time:—

The House proceeded to a Division—

Dr. J. Dickson Mabon: (seated and covered): On a point of order. I would point out, Mr. Deputy-Speaker, that at least seven hon. Members, including myself, have been trying with great difficulty to get through the doors into the Chamber. We have been trying to get through the milling throng in order to vote in the Lobby. Surely there is something wrong when hon. Members are impeded by the outflux of other hon. Members. Should not access to the Lobby be easier for hon. Members who wish to vote?

Mr. Deputy-Speaker (Sir Robert Grimston): I had given the order to lock the doors.

Dr. Mabon: Might I point out, with respect, that I am in no way blaming you, Mr. Deputy-Speaker? I am pointing out that at least seven hon. Members were obstructed from getting through the doors. The order to lock the doors should have been given when it was clear that all hon. Members wishing to enter the Chamber had been able to do so.

Mr. Deputy-Speaker: The order to lock the doors was given after six minutes.

Dr. Mabon: Yes, Mr. Deputy-Speaker, but surely something should be done to ensure the access of hon. Members into the Chamber, otherwise hon. Members may be deprived of the ability to vote. Several of my hon. Friends and I were in Committee upstairs and could not get here in time.

Mr. Deputy-Speaker: I cannot help the hon. Member. I have explained the rule; that in six minutes the doors are locked.

Dr. Mabon: What about the free access of hon. Members into the Chamber? Something must be done to ensure their free access. As I have said, seven hon. Members who legitimately tried to get in could not do so in time.

Mr. Deputy-Speaker: Was the hon. Member impeded from getting into the Division Lobby?

Dr. Mabon: Seven hon. Members— and I will testify to having been one of them— were impeded, not maliciously, but by the pressure of the throng. We were impeded from getting into the Chamber in time. I am raising this point in the hope that this sort of thing will not occur again, otherwise hon. Members will not be able properly to discharge their Parliamentary duty.

Mr. Deputy-Speaker: In view of what the hon. Gentleman tells me, I will call the Division again.

Mr. Callaghan(seated and covered): Further to the point of Order, Mr. Deputy-Speaker. After you have called the Division again, will you have inquiries made to ascertain why there was such a crush at the entrance to the Chamber? Some of us got into the Division Lobby only by using physical force. I have never known such a crush, and I wondered why it was. I shall be grateful if inquiries can be made.

Mr. Deputy-Speaker: I will cause inquiries to be made.

Question put,"That the Clause be read a Second time:—

The House divided:Ayes 175, Noes 237.

Division No. 233.]
AYES
[8.37 p.m.


Abse, Leo
Bowen, Roderic (Cardigan)
Collick, Percy


Ainsley, Wiliam
Boyden, dames
Craddock, George (Bradford, S.)


Allaun, Frank (Salford, E.)
Braddock, Mrs. E. M.
Cronin, John


Allen, Scholefield (Crewe)
Bray, J. W.
Cullen, Mrs. Alice


Awbery, Stan
Brockway, A. Fenner
Dalyell, T.


Bacon, Miss Alice
Broughton, Dr. A. D. D
Davies, G. Elfed (Rhondda, E.)


Baxter, William (Stirlingshire, W.)
Brown, Rt. Hon. George (Belper)
Deer, George


Bence, Cyril
Brown, Thomas (Ince)
Delargy, Hugh


Bennett, a. (Glasgow, Bridgeton)
Butler, Herbert (Hackney, C.)
Dempsey, James


Blackburn, F.
Butler, Mrs. Joyce (Wood Green)
Diamond, John


Blyton, William
Callaghan, James
Dodds, Norman


Boardman, H.
Chapman, Donald
Donnelly, Desmond


Bowden, Rt. Hn. H. W. (Leics. S.W.)
Cliffe, Michael
Dugdale, Rt. Hon. John




Ede, Rt. Hon. C.
Jones, Jack (Rotherham)
Pursey, Cmdr. Harry


Edeiman, Maurice
Jones, J. Idwal (Wrexham)
Randall, Harry


Edwards, Rt. Hon. New (Caerphilly)
Kelley, Richard
Rankin, John


Edwards, Robert (Bilston)
Key, Rt. Hon. C. W.
Rhodes, H.


Fernyhough, E.
Lawson, George
Roberts, Albert (Normanton)


Fitch, Alan
Ledger, Ron
Robertson, John (Paisley)


Fletcher, Eric
Lee, Frederick (Newton)
Rodgers, W. T. (Stockton)


Foot, Michael (Ebbw vale)
Lever, L. M. (Ardwick)
Rogers, G. H. R. (Kensington, N.)


Forman, j. C.
Lewis, Arthur (West Ham, N.)
Ross, William


Fraser, Thomas (Hamilton)
Lipton, Marcus
Royle, Charles (Salford, West)


Galpern, Sir Myer
Loughlin, Charles
Short, Edward


Ginsburg, David
Lubbock, Eric
Silverman, Julius (Aston)


Gordon Walker, Rt. Hon. P. C.
Mabon, Dr. J. Dickson
Silverman, Sydney (Nelson)


Greenwood, Anthony
McCann, John
Sherrington, Arthur


Grey, Charles
MacColl, James
Slater, Mrs. Harriet (Stoke, N.)


Griffiths, David (Rother Valley)
Mclnnes, James
Slater, Joseph (Sedgefieici)


Griffiths, Rt. Hon. James (Llanelly)
McLeavy, Frank
Small, William


Griffiths, W. (Exchange)
MacMillan, Malcolm (Western Isles)
Smith, Ellis (Stoke, S.)


Hale, Leslie (Oldham, W.)
MacPherson, Malcolm (Stirling)
Sorensen, R. W.


Hall, Rt. Hn. Glenvil (Colne Valley)
Mallalieu, J. P. W.(Huddersfield, E.)
Spriggs, Leslie


Hamilton, William (West Fife)
Manuel, Archie
Stewart, Michael (Fulham)


Hannan, William
Mapp, Charles
Stones, William


Harper, Joseph
Mason, Roy
Strachey, Rt. Hon. John


Hart, Mrs. Judith
Mayhew, Christopher
Strose, Dr. Barnett (Stoke-on-Trent,C.)


Hayman, F. H.
Mendelson, J. J.
Swingler, Stephen


Henderson,Rt.Hn.Arthur(Rwly Regis)
Millan, Bruce
Taverne, D.


Herbison, Miss Margaret
Milne, Edward
Taylor, Bernard (Mansfield)


Hilton, A. V.
Mitchison, G. R.
Thompson, Dr. Alan (Dunfermline)


Holman, Percy
Monslow, Walter
Timmons, John


Hooson, H. E.
Moody, A. S.
Tomney, Frank


Houghton, Douglas
Morris, John
Warbey, William


Howell, Charles A. (Perry Barr)
Moyle, Arthur
Watkins, Tudor


Howell, Denis (Small Heath)
Mulley, Frederick
Weitzman, David


Hoy, James H.
Neal, Harold
Wells, William (Walsall, N.)


Hughes, Emrys (S. Ayrshire)
Noel-Baker, Rt.Hn. Philip(Derby,S.)
Wilkins, W. A.


Hunter, A. E.
Oliver, G. H.
Willey, Frederick


Hynd, H. (Accrington)
Owen, Will
Williams, D. J. (Neath)


Irvine, A. J. (Edge Hill)
Padley, W. E.
Williams, LI (Abertillery)


Irving, Sydney (Dartford)
Pannell, Charles (Leeds, W.)
Williams, W. R. (Openshaw)


Janner, Sir Barnett
Pargiter, G. A.
Willis, E. G. (Edinburgh, E.)


Jay, Rt. Hon. Douglas
Pavitt, Laurence
Winterbottom, R. E.


Jeger, George
Pearson, Arthur (Pontypridd)
Woof, Robert


Jenkins, Roy (Stechtord)
Pentland, Norman
Wyatt, Woodrow


Johnson, Carol (Lewisham, S.)
Popplewell, Ernest



Jones, Dan (Burnley)
Prentice, R. E.
TELLERS FOR THE AYES:


Jones, Elwyn (West Ham, S.)
Price, J. T. (Westhoughton)
Mr. Redhead and Mr. Ifor Davies.




NOES


Agnew, Sir Peter
Chataway, Christopher
Glover, Sir Douglas


Allason, James
Chichester-Clark, R.
Glyn, Dr. Alan (Clapham)


Atkins, Humphrey
Clark, William (Nottingham, S.)
Gower, Raymond


Balniel, Lord
Cleaver, Leonard
Green, Alan


Barber, Anthony
Cole, Norman
Grosvenor, Lt.-Col. R. G.


Barlow, Sir John
Collard, Richard
Curden, Harold


Batsford, Brian
Cooke, Robert
Hall, John (Wycombe)


Baxter, Sir Beverley (Southgate)
Cooper, A. E.
Hamilton, Michael (Wellingborough)


Bell, Ronald
Cordeaux, Lt.-Col. J. K.
Harris, Reader (Heston)


Bennett, F. M. (Torquay)
Costain, A. P.
Harrison, Col. Sir Harwood (Eye)


Bennett, Dr. Reginald (Goe A Fhm)
Coulson, Michael
Harvey, John (Walthamstow, E.)


Berkeley, Humphry
Craddock, Sir Beresford
Harvie Anderson, Miss


Bevins, Rt. Hon. Reginald
Crawley, A. M.
Hastings, Stephen


Bidgood, John C.
Critchley, Julian
Hay, John


Biffen, John
Cunningham, Knox
Heald, Rt. Hon. Sir Lionel


Birch, Rt. Hon. Nigel
Currie, G. B. H.
Henderson, John (Cathcart)


Bishop, F. P.
Dance, James
Hendry, Forbes


Black, Sir Cyril
d'Avigdor-Goldsmld, Sir Henry
Hicks Beach, Maj. W.


Bourne-Arton, A.
Deedes, W. F.
Hlley, Joseph


Box, Donald
de Ferranti, Basil
Hill, Mrs. Eveline (Wythenshawe)


Boyd-Carpenter, Rt. Hon. John
Donaldson, cmdr. C. E. M.
Hill, J. E. B. (S. Norfolk)


Boyle, Sir Edward
Doughty, Charles
Hirst, Geoffrey


Brawis, John
Duncan, Sir James
Hooson, Sir John


Brooke, Rt. Hon. Henry
Elliot, Capt. Walter (Carshalton)
Hocking, Philip N.


Brown, Alan (Tottenham)
Emery, Peter
Holland, Philip


Browne, Percy (Torrington)
Errington, Sir Eric
Hornby, R. P.


Bryan, Paul
Farey-Jones, F. W.
Hornsby-Smlth, Rt. Hon. Dame P.


Buck, Antony
Farr, John
Howard, Hon. C. R. (St. Ives)


Bullard, Denys
Finlay, Graeme
Howard, John (Southampton, Test)


Bull us, Wing Commander Eric
Fisher, Nigel
Hughes-Young, Michael


Burden, F. A.
Galbraith, Hon. T. G. D.
Hulbert, Sir Norman


Butcher, Sir Herbert
Gammans, Lady
Iremonger, T. L.


Campbell, Gordon (Moray &amp; Nairn)
Gardner, Edward
Irvine, Bryant Godman (Rye)


Carr, Compton (Barons Court)
Gibson-Watt, David
James, David


Carr, Rnbert (Mitcham)
Grlmour, Sir John
Johnson, Dr. Ronald (Carlisle)







Johnson, Eric (Buckley)
Morgan, William
Stodart, J. A.


Johnson Smith, Geoffrey
Mott-Radclyffe, Sir Charles
Stoddart-Scott, Col. Sir Malcolm


Jones, Rt. Hn. Aubrey (Hall Green)
Nabarro, Gerald
Storey, Sir Samuel


Joseph, Sir Keith
Neave, Airey
Studholme, Sir Henry


Kerans, Cdr. J. S.
Nicholls, Sir Harmar
Talbot, John E.


Kerby, Capt. Henry
Nicholson, Sir Godfrey
Tapsell, Peter


Kershaw, Anthony
Nugent, Rt. Hon. Sir Richard
Taylor, Sir Charles (Eastbourne)


Kimball, Marcus
Oakshott, Sir Hendrie
Taylor, Edwin (Bolton, E.)


Kirk, Peter
Orr, Capt. L. P. S.
Taylor, Frank (M'ch'st'r, Moss Side)


Lagden, Godfrey
Osborn, John (Hallam)
Taylor, W. J. (Bradford, N.)


Langford-Holt, Sir John
Page, John (Harrow, West)
Teeling, Sir William


Leather, Sir Edwin
Page, Graham (Crosby)
Temple, John M.


Legge-Bourke, Sir Harry
Pannell, Norman (Kirkdale)
Thomas, Leslie (Canterbury)


Lewis, Kenneth (Rutland)
Pearson, Frank (Clitheroe)
Thomas, Peter (Conway)


Lilley, F. J. P.
Percival, Ian
Thompson, Kenneth (Walton)


Linstead, Sir Hugh
Peyton, John
Thompson, Richard (Croydon, S.)



Pickthom, Sir Kenneth
Tiley, Arthur (Bradford, W.)


Litchfield, Capt, John
Pike, Miss Mervyn
Touche, Rt. Hon. Sir Gordon


Lloyd, Rt. Hon. selwyn (Wirral)
Pitman, Sir James
Turner, Colin


Longbottom, Charles
Pitt, Miss Edith
Turton, Rt. Hon. R. H.


Longden, Gilbert
Pott, Percivall
Tweedsmuir, Lady


Loveys, Walter H.
Price, David (Eastleigh)
van Straubenzee, W. R.


Lucas, Sir Jocelyn
Prior, J. M. L.
Vaughan-Morgan, Rt. Hon. Sir John


Lucas-Tooth, Sir Hugh
Profumo, Rt. Hon. John
Vickers, Miss Joan


McAdden, Sir Stephen
Proudfoot, Wilfred
Wakefield, Sir Wavell


McLaren, Martin
Pym, Francis
Walder, David


Maclean,Sir Fitzroy (Bute&amp; N. Ayrs.)
Ramsden, James
Walker, Peter


MacLeod, John (Ross &amp; Cromarty)
Redmayne, Rt. Hon. Martin
Walker-Smith, Rt. Hon. Sir Derek


McMaster, Stanley R.
Rees, Hugh
Wall, Patrick


Macpherson, Niall (Dumfries)
Ridley, Hon. Nicholas
Ward, Dame Irene


Maddan, Martin
Roberts, Sir Peter (Heeley)
Webster, David


Maginnis, John E.
Robinson, Rt. Hn. Sir R. (B'pool, S.)
Wells, John (Maidstone)


Maltland, Sir John
Rodgers, John (Sevenoaks)
Whitelaw, William


Manningham-Buller, Rt. Hn. Sir R.
Roots, Williiam
Williams, Dudley (Eieter)


Markham, Major Sir Frank
Ropner, Col. Sir Leonard
Williams, Paul (Sunderland, S.)


Marlowe, Anthony
Russell, Ronald
Wills, Sir Gerald (Bridgwater)


Marshall, Douglas
St. Clair, M.
Wilson, Geoffrey, (Truro)


Marten, Neil
Sharpies, Richard
Wise, A. R.


Matthews, Gordon (Merlden)
Shaw, M.
Wolrige-Gordon, Patrick


Mawby, Ray
Shepherd, William
Wood, Rt. Hon. Richard


Maxwell Hyslop, R. J.
Skeet, T. H. H.
Woodnutt, Mark


Maydon, Lt.-Cmdr. S. L. C.
Smith, Dudley (Br'ntf'd &amp; Chiswick)
Woollam, John


Mills, Stratton
Smithers, Peter



Miscampbell, Norman
Spearman, Sir Alexander
TELLERS FOR THE NOES:


Montgomery, Fergus
Stanley, Hon. Richard
Mr. Noble and Mr. Ian Eraser.


More, Jasper (Ludlow)
Stevens, Geoffrey

New Clause.—(REDUCTION OF ESTATE DUTY IN RESPECT OF INCOME TAX ON SHARES OF CERTAIN BUILDING COMPANIES NOT CARRYING ON TRADE.)

Where any shares falling to be valued in accordance with section fifty-five of the Finance Act, 1940, or in accordance with section thirty of the Finance Act, 1954, are sold within six years after the death by persons accountable far the duty payable on the death, then for the purposes of estate duty the value so determined shall be reduced by an appropriate proportion of any liability to income tax or surtax which may be assessed under section twenty-two of the Finance Act, 1960:

Provided that no person shall by virtue of this section be liable to pay more tax than he would have been liable to pay if this section had not been enacted.

For the purposes of this clause the appropriate proportion of the tax liability shall be an amount which is equivalent to the amount of income tax and surtax which would have been assessed had the said shares been sold alt a price equal to the value determined for Estate Duty purposes.— [Sir J. Barlow.]

Brought up, and read the First time.

8.45 p.m.

Sir John Barlow: I beg to move, That the Clause be read a Second time.
I move this new Clause in the absence of my hon. Friend the Member for Dover (Mr. Arbuthnot), owing to his being a Church Estates Commissioner. It seeks to relieve hardship which undoubtedly can exist in a certain combination of circumstances.
Under Section 55 of the Finance Act, 1940, and Section 22 of the Finance Act, 1960, for example, if a person dies owning 99 per cent. of the share capital of a company the value of those shares for Estate Duty purposes would, under Section 55 of the Finance Act, 1940, be based on the value of the assets at the time of death.
If the activities of that company by chance consisted of the erection of a building and the shares were sold after death but within six years of the completion of the building, then, under Section 22 of the Finance Act, 1960, the


company would be treated as carrying on a trade with the building as stock. This, in effect, would give rise to a liability to tax on the profit arising out of the sale of the shares of the company.
As this liability arises after the death, as a direct result of actions taken after death, it is not, as the law stands at the moment, deemed to be a liability at the date of death. Consequently, it is possible in these circumstances for the estate to attract Estate Duty, Income Tax, and, possibly, Surtax as well, which, in certain circumstances, could mean taxing at the rate of over 100 per cent.
In my opinion, these circumstances are not what the Chancellor meant. It is possibly an oversight, and I bring this to his attention, and I hope that he will look kindly on this new Clause, which will put right an injustice which is likely to arise.

The Economic Secretary to the Treasury (Mr. Anthony Barber): My hon. Friend the Member for Dover (Mr. Arbuthnot) is nothing if not persistent. He first raised this point in correspondence with my hon. Friend the Financial Secretary last year, and he then, also in 1961, put down a new Clause which, unfortunately, was not called. Since then he has written to me, and we have discussed the matter together. Now he has arranged for my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) to move this new Clause.
The purpose of the Clause, as my hon. Friend has pointed out, is to limit a possible double liability to tax, that is to say, to Estate Duty on the one hand, and Income Tax and Surtax, on the other, on shares in one-man companies which fall within Section 22 of the Finance Act, 1960, the Section which my hon. Friend explained.
Briefly, the situation with which the Clause is concerned arises in this way. Where a controlling shareholding in a one-man company passes on a death, the shares are valued for Estate Duty purposes under the Section which my hon. Friend mentioned, Section 55 of the Finance Act, 1940, which involves valuation of assets, or under Section 30 of the Finance Act, 1954, on the sale price of those shares if they are sold within three years of the death. But if the company is one of the kind dealt with in Section

22 of the Finance Act, 1960, the sale of the deceased's shares in the company, which may be necessary to find the funds with which to pay the Estate Duty, may attract liability to Income Tax and Surtax under Section 22. No deduction for the potential liability under Section 22 will be made in valuing the shares for Estate Duty, nor will a deduction for Estate Duty liability be made in arriving at the tax liability under Section 22 on the sale of the shares.
The solution which is proposed in the Clause is not quite satisfactory in certain respects, but there is a case for giving relief where a double charge to Estate Duty, on the one hand, and Income Tax and Surtax, on the other, arises in these circumstances. The cases in which this happens are likely to be very few, and the somewhat hypothetical case which my hon. Friend gave is unlikely to arise in practice. Nevertheless, the point which he has brought to our attention is obviously one with which we ought to deal, and we will introduce relieving legislation in due course. It cannot be in this Bill and it may take a rather different form from that proposed in the Clause.
I give the assurance that until legislation is introduced we shall by concessions meet any cases where a sale of shares by executors creates liability under Section 22, provided that the same person or persons bear the incidence of both the Income Tax and the Estate Duty; the Inland Revenue will in such cases repay an appropriate amount of the Estate Duty. I am sure that, in view of my explanation, the House will agree that it is only right that we should act in this way, and I hope that with that assurance my hon. Friend will not press the Motion.

Mr. Jay: Would the Economic Secretary make a little clearer what he is doing? I agree that as the case was put, somewhat briefly and inevitably somewhat technically, it soundedprima faciethat some case had been made out for some sort of adjustment of the charge. But will he explain exactly how the liability for Income Tax and Surtax arises? It is clear how the Estate Duty liability arises in the ordinary way, but what is the profit on which the Income Tax and Surtax have


to be paid which gives this appearance of double taxation? Is it a capital profit on the sale of the shares? If so, it could be described as an exceptional form of double taxation. Or is it, in some cases, the current profits of the company? I am not clear why we have to have exceptional relief.

Mr. Barber: The tax arises in this way, as far as my recollection goes— although I have not immediately to hand a copy of Section 22 of the 1960 Act: the right hon. Gentleman will recollect, as I do, that the Section was passed to deal with the type of tax avoidance which occurred where arrangements were made under which a person wishing to acquire the product of the company bought the shares in the company and thus obtained the use of the product through his control of the company instead of buying the product of the company direct in the ordinary way.
The effect of these arrangements was that the shareholders in the trading company transmuted what would have been a taxable profit in the hands of the company, if its property had been sold in the normal way, into a nontaxable gain in their hands. In general terms that answers the question.
Without this section it would have been a capital gain not liable to either Income Tax or Surtax. It was to stop up that loophole that this Section was passed, and to make it notionally at any rate, a taxable profit. Unfortunately, the point to which my hon. Friend the Member for Dover first drew our attention was overlooked.
I would add, in fairness to those who drew up this legislation, that as far as I know no single case of the actual double liability has yet arisen, although it is conceivable that it could do so in the future. For this reason I hope that the House will take the view that we might well deal with the matter by concession for the time being.

Mr. Jay: That is to say, we are concerned with capital profits which, but for this exceptional reason, would not have been liable to Income Tax or Surtax.

Mr. Barber: We are dealing with capital profit which, by virtue of Section 22 of the 1960 Act, is made liable to Income Tax or Surtax. I am not sure whether this is by treating it as capital profit or deeming it to be income.

Sir J. Barlow: In view of the assurance give by my hon. Friend, I beg to ask leave to withdraw the Motion.

Motion, and Clause, by leave, withdrawn.

New Clause.— (SHORTER TIME LIMIT FOR ASSESSMENTS, ETC., OF RETIREMENT PENSIONS.)

In relation to income tax on retirement pensions under the National Insurance Acts, 1946 to 1961 (including graduated retirement benefit and equivalent pensions benefit under the National Insurance Act, 1959), section forty-seven of the Income Tax Act, 1952 (time limit for assessments, additional assessments and surcharges), and section fifty-one of the Finance Act, 1960 (time limit for recovery from taxpayer of tax lost through his fault), shall have effect with the substitution of references to two years for references to six years.— [Mr. Houghton.]

Brought up, and read the First time.

Mr. Houghton: I beg to move, That the Clause be read a Second time.
The Clause seeks to reduce from six years to two years the limit of time that the Inland Revenue may go back to collect under-assessed tax on retirement pensions payable under the National Insurance Acts. At present the Inland Revenue can go back six years to collect any tax which may have been under-assessed or under-paid in cases where arrear of tax is caused by non-assessment of retirement pension or any other circumstances which have led to underassessment of tax.
The Clause proposes to limit that period to two years where the tax is related to a retirement pension received under the National Insurance Scheme. I, and probably other hon. Members, have received complaints from time to time from retirement pensioners that they have had a demand for under-paid or under-assessed tax on their pensions. In some cases the demand has come to several pounds on pensions paid in previous years. I have had cases where under-assessment related to as far back as 1957, 1958 or 1959.
I have had correspondence with the Chief Inspector of Taxes about some of


these cases because I have been concerned that they should arise and cause considerable financial embarrassment and annoyance to taxpayers who believed that they had discharged their tax to date and who have been very upset to find that they are in debt to the Inland Revenue. I have received from the Chief Inspector very courteous and full explanations of the circumstances of the cases about which I had written to him. I am not going to quote those cases because I have received full explanations and I have no desire to base my case on any of them. What I do is to take an actual case where things up to now have gone right, but which may still go wrong.
9.0 p.m.
Take the ease of a constituent of mine, a widow who reached the age of 60 five years ago and postponed her retirement for five years in order to earn increments on her pension. In April this year she reached the age of 65 and was thereupon entitled to her full retirement pension. Having reached the age of 65, she is no longer under the earnings rule and can therefore draw her pension in full and earn such wages as she can get. That means that as from a date in April that woman, who is still working, was able to draw retirement pension of £3 16s. a week, roughly £197 a year extra money.
Clearly, since retirement pensions are taxable, this will add to her Income Tax liability. I received a very sharp protest from the woman concerned that the retirement pension should be taxable at all. Many people feel that way, but it is taxable in common with all other vocational pensions. In this case there is a liability on an extra income from the retirement pension of £197 a year. The Inland Revenue would be perfectly entitled to say to that woman, "You are now receiving £197 a year extra. We propose to levy tax on that at the end of the year when you have received the money and to ask you for the tax in a single payment." It would impose hardship in many cases to ask for a lump sum of tax at the end of the year. So, to ease the payments of the additional tax in cases of this kind, the Inland Revenue uses a special system to show consideration to the taxpayer. It sets off reliefs against the amount of the

retirement pension and concentrates the tax payable on her wages under Pay-as-you-earn. In such cases there is already a small arrear of tax on the retirement pension received in the period intervening between April and June when the tax adjustment was made. In order to ease even the payment of a small lump sum there is a special spread over of the tax on future earnings under Pay-as-you-earn. There is a special form, called P.83, which explains, as best the Inland Revenue can explain anything to the taxpayer, just what has happened.
Everything in this case has gone absolutely according to the book and is showing the taxpayer as much consideration as is possible by spreading the tax on the pension forward over the earnings that this woman will receive Where it may go wrong, and where in other cases matters have gone wrong, is if this woman gives up work in the near future before she has discharged all her obligations on the pension already received and by giving up work interrupts the sequence of Pay-as-you-earn deductions by which the tax on the pension would be collected.
If this woman gives up work she will have no wages from which tax can be deducted to take account of her liability on the pension or to recoup the revenue for the under-payment of tax on the small amount of pension already received,. Sometimes there is delay in informing the Inland Revenue that a per. son in such circumstances has given up work. The Inland Revenue allows things to go on in blissful ignorance of the fact that the person has given up work and tax which the office thought was being collected has ceased to be collected under Pay-as-you-earn. In other cases—we have to admit this frankly—there is some mischance in the tax office—pressure of work or other circumstance—as a result of which, although information is received, there is delay in dealing with the consequences.
Where a woman such as the one 1 have spoken of gives up work and has no further earnings but still remains liable to some amount of tax, as may be the case on a pension of £197 a year, possibly with income from some savings as well, the Inland Revenue has to ask the taxpayer for a lump sum payment


of the tax due because she no longer has any earnings or income from which periodical deductions may be made under P. A. Y. E. She is, therefore, in the position of any taxpayer who is liable to pay tax in that way, and she has to pay over a lump sum to the collector.
The House will understand that it is very upsetting for people in such circumstances, believing that they have discharged their tax liability and not understanding all the jargon of this subject, to find months, or even in some cases years, after they have given up work and adjusted themselves to a modest life on a retirement pension that they have to pay £4, £5, £10, or even £23 as in a case I have seen. They ask, "However, has this come about? Why is there a demand for tax going back all this time?"
By the new Clause, we seek to limit the period over which the Inland Revenue may go back to two years so that exceptional hardship may be avoided whenever, from whatever cause, the Inland Revenue has not caught up with the recalculation of tax by the end of two years. We think that two years is long enough to go back in asking a retirement pensioner who thought he or she had discharged the tax liability to pay tax out of the slender enough resources which such a person may have, on the National Insurance pension in many cases, even to pay anything.
I give credit to the Inland Revenue that, in some of these cases, when a taxpayer is obviously of very slender resources indeed, the tax underpaid has been written off on the grounds of hardship. But no self-respecting retirement pensioner likes to feel that he is the subject of tax relief on grounds of hardship. People are proud even though they are poor, and they want to feel that they have paid their debts, even to the Inland Revenue, and will not be subject to demands long after the event and in circumstances where they find it difficult to pay.
We have no desire to be vexatious about the new Clause. To a large extent, it is a matter of administration. We have no desire for the terms of the Clause to be regarded as a reflection upon the administration of the Inland Revenue. The officers of the Inland

Revenue are doing their best in very difficult circumstances. I ask the Financial Secretary to give the House an assurance that every effort will be made to avoid this kind of thing.
It is avoided if there is prompt action after the taxpayer stops work and there is a legacy of tax arrears due. It is desirable that the Inland Revenue should promptly step in and say, "Your position has changed. You realise that you have no earnings from which we can make these deductions. We should try to help by spreading the tax forward, but unfortunately this is not new possible, because you have given up work. There is something to pay, and we want to tell you promptly what it is and to make some arrangement with you, if necessary, for pay in instalments." There is never any difficulty about any person in these circumstances paying by instalments Where the circumstances justify it.
I must impress upon the Financial Secretary that there are two requirements here. One is that there should be prompt notification to the Inland Revenue by the employers, and, where necessary, by the taxpayers themselves, that they have changed their condition, that they have left their work and are not continuing to work, and that, therefore, their tax position should be adjusted.
In some cases, of course, the employer notifies the Inland Revenue quite promptly that the taxpayer has left work, and the Inland Revenue then has to assume either that the taxpayer will find another job, as does happen in some cases, or that he has given up work for good, and they must find out fairly quickly which it is to be. There is an obligation on the taxpayer, and I hope it will not be lost sight of, that he should tell the Inland Revenue, although many of these people do not understand it very well, and feel that when they have left work they have finished paying their tax.
There is also an obligation on the Inland Revenue officer to deal promptly with these cases when they arise. I know that many Inland Revenue officers are working under pressure. I know that they have heavy arrears of tax work on their desks. Something always comes


out of the Budget, either re-coding or a change in administration, and there is overtime and all the worries in the world that can be thrown upon the Inland Revenue staff at particular seasons. It is the only Department in the Civil Service which is subject to the hazards of an annual Act of Parliament, with all its potential for extra work, the disturbance of the rhythm of its duties and so on. There is an obligation resting on the Inland Revenue to see that this sort of hardship does not arise if it can possibly help it, and it is that which I want to impress upon the Financial Secretary.
I conclude, therefore, by saying that there should, first, be arrangements made for a prompt notification to the Inland Revenue of the retirement pensions that come into payment. That is the first thing. The second thing is that, in cases where people are staying on at work, those arrangements which are considerate to the convenience of the taxpayer should be continued, and that prompt action should be taken when there is any interruption in the work of the taxpayer. That means finding out whether he is carrying on, in which case P A Y E. deductions can continue, or whether he has given up work, in which case they would cease, and an adjustment has to be made. Too often, these cases are left for six or nine months or even longer before the taxpayer is told about these arrangements I hope it may help by ventilating this matter, which I do not wish to exaggerate, because there are not millions of cases. I do not know how many there are, though there are enough to provide a source of discontent and difficulty for people for whose circumstances this House has always shown consideration.
I hope that the Financial Secretary will be able to relieve my anxiety, the anxieties of my hon. Friends and those of the House as a whole on this matter. I am sure that if he insists that the Inland Revenue shall see that these grievances shall be minimal in number and extent, there will be no need to have to ask the House to divide on the new Clause.

9.15 p.m.

Mr. Millan: This is an important Clause. Even if the Financial Secretary is not able to accept it, I hope

that this debate will do something to relieve circumstances of the kind described by my hon. Friend the Member for Sowerby (Mr. Houghton). There is nothing more irritating to a taxpayer who is going merrily along thinking that he is discharging all his obligations under P A Y E. than suddenly to be faced with a demand for arrears. He does not understand how the arrears have accumulated. Even after the Inland Revenue explains it to him, he feels a sense of grievance. This sense of grievance is particularly marked in the case of people who are rather old and whose earning capacity is extremely limited.
There are obviously two ways of tackling this. First, there is the way suggested in the Clause, which is to give relief if the circumstances become such that arrears have accumulated. There is also the second approach, to try to adopt methods in the Inland Revenue which would prevent many of these arrears ever accumulating in the first place. It is from this point of view that I want to put two points of view to the Financial Secretary.
The first point concerns a case which I had some considerable time ago, involving a constituent. I cannot remember the exact details. I have not refreshed my memory by looking at the correspondence. I think that it was something like this. In any case, the principle is the same. A retired policeman, a public service pensioner, was being paid a pension and also doing a small job, which meant that the pension and the wage together brought him within the tax provisions. He was paying tax under P A Y E. There was an increase in the public service pension. The increase was not notified to the Inland Revenue. There was no adjustment of his code number. The public service pension was adjusted, but no adjustment was made to the code number to take account of the increase.
This was not discovered for a considerable time. Then there was a bill for the arrears amounting to about £25 or £30, which is a substantial sum to a semi-retired person. In this case it was especially unfortunate, because the person concerned wanted to give up work altogether. Provided that he continued to work there was an opportunity to pay off the arrears, but if he stopped work


and the arrears were still there it was obviously a large bill. The Inland Revenue was very reasonable about it, allowing the arrears to be paid off over two years. I do not think that anyone would complain about its practice in this respect.
This is the point I want to put to the Financial Secretary. That increase in pension was made under one of the Pensions (Increase) Acts. I forget which one it was. Is it beyond the capacity of the Inland Revenue, when a pensions increase of this sort takes place, to look through the records and see which taxpayers will be affected so that adjustments can be made to their code numbers? I realise that this may be a formidable operation. Every tax office obviously deals with many thousands of taxpayers, and a comparatively small number of them will be in circumstances which I have mentioned.
If the Inland Revenue could devise a simple way, without a too formidable workload being involved, of carrying out such a checking operation when something happened absolutely publicly, namely, an increase in pensions because of an Act of Parliament, many cases of the kind I have just mentioned and similar to the kind mentioned by my hon. Friend the Member for Sowerby could be avoided and the necessity for this Clause, and for going through the operation of spreading tax arrears over a number of years, would not arise.
If that were a practicable proposition for public service pensioners, it might also be a practicable proposition for retirement pensioners who are being paid retirement pensions and who are still working and are, therefore, taxable on their retirement pensions as well as on their wages and salaries. When there is an increase in retirement pensions—that is something which happens by a public Aot—the Inland Revenue has immediate knowledge of it.
I know that in all these cases there is a responsibility on the taxpayer. Fundamentally, the responsibility is on him to report the increased income to the Inland Revenue. But, in practice, many taxpayers do not understand that they have to do that. They do not understand that they will accumulate arrears if they do not do it.
Will the Inland Revenue consider taking the initiative in this matter? There may be administrative difficulties which cannot be overcome, but I hope that the Financial Secretary will get the Inland Revenue to consider whether it can prevent these cases taking place which must affect many thousands of people every year and which cause irritation far beyond the sums of money concerned, particularly since many of the taxpayers do not understand how they got into difficulties in the first place. They are paying P A Y E. and think that, being on the P A Y E. system, this cannot happen to them.
As I say, it is extremely irritating if it 'happens. Perhaps the Inland Revenue will apply its mind to seeing whether a system can be adopted to prevent it from happening.

Sir E. Boyle: I can give the hon. Member for Sowerby (Mr. Houghton) the assurance for which he has asked. It is true that difficulties arise in recovering tax on National Insurance retirement pensions. I think that they arise in a number of ways. We try to collect tax in respect of the National Insurance pension under P A Y E. whenever possible. Nowadays, a good many pensioners have part-time work and many also have pensions from their employers as well as the National Insurance pension. Fairly substantial arrears of tax can accumulate if anything goes wrong with the arrangements for assessment and recovery of tax.
This problem can arise in various ways; it falls into a number of parts. The first and most important is to ensure that the Revenue knows as soon as possible that a National Insurance pension is being paid. In many cases the P A Y E. machinery ensures that the inspector is told by the employer. But I agree that there are cases in which the machinery does not work as it should and in which the inspector does not become aware of the facts for some time.
I particularly agree with a very good point made by the hon. Member for Sowerby. It is that when a person of that age changes his position in life—either comes into work or ceases the work which he has been doing—it is obviously extremely important that there


should be the closest possible cooperation between employers and the Revenue machinery. Certainly, I would not wish to underrate the social aspect of this matter. After all, a number of retired people have a little money put by. It makes a very great deal of difference to them when they suddenly find that that amount of money has to be reduced as a result of an unexpected claim for the recovery of tax, and it can be quite serious for them.
I therefore assure the hon. Members for Sowerby and Glasgow, Craigton (Mr. Millan) that what they have said will be taken into account and that we shall do all be can to see whether we can improve the administrative machine. But I am bound to say that it is just as much a matter of the employer notifying the Revenue as quickly as possible as it is of the Revenue making time to consider these cases.
There are difficulties about the new Clause, which I think the hon. Member for Sowerby realises. What he wants to do is to limit the period during which recovery can be made. The new Clause prescribes a time limit to assessment, which is a slightly different thing. I can see a number of objections to the Clause. It would be an undesirable innovation to have different time limits for assessing the income of different classes of taxpayer. It would be difficult and undesirable for this purpose to discriminate between different kinds of income of the pensioner. Incidentally, the Clause would be of particular benefit to those who fail to declare their pensions to the inspector, and it could be open to abuse.
The hon. Member for Sowerby has, rightly, raised an administrative matter of some importance. If my right hon. Friend the Home Secretary were with us he would, rightly, call this a very human question. We should look at the machinery, and I can give the hon. Member for Sowerby the assurance for which he has asked. However, I ask hon. Members not to press the new Clause.

Colonel Sir Harwood Harrison: I am sure that many people will be very grateful to my hon. Friend for that reply. I have had these cases. If he finds it too expensive on the machinery to get it quicker, would he give rather greater

latitude of write-off to his officials, so that these people do not have nights of worry about finding the money before possibly writing to their Member of Parliament, who then, through the Chancellor, gets the write-off? Is may be too expensive to get it by better administration and cheaper to write off these amounts.

Mr. Houghton: In view of the assurance given by the hon. Gentleman, I beg to ask leave to withdraw the new Clause. I accept his assurance that every effort will be made to improve the machinery. We will see how it will go and, if necessary, return to the matter another time.

Motion and Clause, by leave, withdrawn.

New Clause.—(ANNUAL ALLOWANCES ON INCREASES OF STOCKS OF PRESCRIBED GOODS.)

(1) The Board of Trade with the consent of the Treasury may from time to time by order declare that it is in the national interest that stocks of prescribed goods, held by persons whose business it is to produce such goods, shall be increased; and any such order may be revoked or varied by a subsequent order.
(2) As from the date when such an order is made, a person whose business it is to produce prescribed goods and who increases the stock of such goods which he held at that date, shall be entitled in the assessment of his liability to income tax to an annual allowance in respect of the cost of making and holding the stock comprising that increase; and for the purposes of this section each such increase shall be treated separately and any disposals of stock shall be deemed to be effected from such part of the available stock as was last made.
(3) The rate of an annual allowance under this section shall be for the first complete year fifteen per cent. of the cost and for suceeding years ten per cent. of the original cost:
Provided that no annual allowance shall be made except in relation to a complete year of assessment during which the stock in question is held by the person claiming the allowance.
(4) On the revocation of an order made under subsection (1) of this section all annual allowances made by virtue of that order shall cease.—[Dr. Bray.]

Brought up, and read the First Time.

Dr. Jeremy Bray: I beg to move, That the Clause he read a Second time.
I must ask the indulgence of the House for my maiden speech. I hope, too, that I shall have the understanding of the House for seeking what I imagine is the relative obscurity of this debate.
My purpose in moving the new Clause is to draw attention to a type of economic regulator which would be of the greatest value in my constituency and which, I think, would also be of value to the economy as a whole. I should be failing to follow the example of my predecessor if I were not moved by the interests of my constituents. Sir Jocelyn Simon brought unfailing diligence, courtesy and charm to the service of his constituency, which will long be remembered in Middlesbrough and Thornaby. The good wishes of his constituents go with him in his new work.
There is today considerable and quite genuine unemployment on Teesside. Were this not my maiden speech, I should content myself with blaming the Government, and I shall no doubt do so on future occasions, but, as it is, I must try to go further and, in the full knowledge of the real hardship on Teesside, seek to point to at least one cause and one possible cure not only of the immediate difficulty, but of this type of difficulty in general.
The principal cause of the unemployment on Tees-side at the moment is the recession in the demand for steel, particularly at the heavy end of the steel industry. It is not only the direct unemployment and redundancies which have occurred, but also the consequential reduction in overtime, short-time working, and the general loss of trade in the area from which people are suffering.
Our national accounts, let alone our regional accounts, do not enable anyone to give an estimate of the effect of this loss of income. The nearest parallel that I have been able to find in the way of serious studies is in the State of Utah, which, I understand, our American friends describe as the beehive State, and which, no doubt, has an identical economy with that of Tees-side. In Utah, a 100 dollar drop in steel sales has the effect of reducing the earnings of the employees of the steel industry by about 27 dollars, but when the consequential effect on other trades and industries in Utah are allowed for the personal income of people in the region drops by 102 dollars.
This means that the income of the region drops by no less than four times that of direct employees in the industry.
This would confirm my own observation in Tees-side and the experience of people like travel agents and the shops which report a general reduction in trade.
9.30 p.m.
The main cause of this recession is a reduction in steel stocks which has greatly amplified the reduction in the genuine demand for steel by the consumers. I quoted from the Special Report on Development by the Iron and Steel Board in 1961. This says:
Comparatively mild fluctuations in the output of the engineering and allied trades…seem to have been exaggerated three or four times in their impact on steelmakers.
The House might like to bear in mind, when I read the next paragraph, that this no doubt bears the touch of Sir Robert Shone, now the Director-General of N. E. D. C.
No doubt such fluctuations in steel demand are partly explained by credit restrictions at one time and by a desire not to be caught short of steel at another. Similar exaggerations are familiar in the United States, and elsewhere. But they are most undesirable, particularly from the point of view of the steel industry. During the exaggerated peaks of demand steel was imported that, with better timing, could well have been supplied more economically by home producers. The underemployment of those producers during recession was thus aggravated. Improved techniques in the management of the national economy, growing confidence by consumers in the ability of the steel industry to deliver steel quickly, and possibly the adoption of a stocking policy by producers "—
I ask the House to note this point—
and others, aimed at assisting stability, would help to reduce such wasteful vagaries. But the threat of them must not be overlooked in providing for the future.
A year after the publication of that Report, we are in precisely the same position. There have been continuing complaints from the Iron and Steel Board, from individual steel manufacturers, from the Iron and Steel Federation and from the trade unions representing employees in the steel industry. We have whole areas plunged into recession for precisely the reasons which were described in that Report.
This is not only a problem in steel—. my own experience does not lie in that industry—it is also a great difficulty in textiles and in chemicals, to mention only two. In these industries, stock cycles in particular products cause variations of 10 to 20 per cent. in output from year to year. These variations


are lost in the figures for stocks for the country as a whole. They are lost even in the aggregate figures for individual companies and industries, and it is only when one looks at the output of a particular plant that one realises how serious this problem of stock fluctuations is.
The House perhaps realises that, with these enormous fluctuations going on, industrialists find some difficulty in seeing just what the implications of this 4 per cent. per annum growth in gross domestic product mean. It is like looking for a needle in a rather rapidly moving haystack. This is a difficult technical question certainly, but it has the most dire human significance, and any hon. Member who would like to refresh his memory about the meaning and hardship of unemployment I would invite to visit my own constituency.
Only this week the House was expressing concern about the difficulties at Fylingdales, but perhaps hon. Members do not know that the underlying reason for these difficulties is that the men on the job do not see the prospect of another contract coming along when this one expires. It is no accident that we find these difficulties in our most modern industries. There are technological factors behind it. There is the increasing scale of manufacture. There is the increasing, size of individual plants. There is the increased capital intensity, and the increasing capital per man employed. All these factors tend to increase the difficulty of this problem.
I turn now to the general problem of the control of stocks. The cause is often a lack of knowledge and understanding of the broad pattern of demand at any time. We make a great mistake if we assume that people are perfect in their knowledge and perfect in their pursuit of their interests. This does not correspond with the daily experience of people in industry. We are very short of understanding and knowledge, and I am afraid that industry does not always do as much as it could to spread knowledge about its true position.
Where a real effort is made to spread information, it has desirable results. I mention only the example of Courtaulds. In one product, rayon staple, the firm has succeeded in reducing the stock

changes as a percentage of consumption from 15 to 20 per cent. up to 1954, to less than 5 per cent. in recent years. and it has done this simply by spreading information throughout the textile industry about the real position of production at each stage, and giving full information about its own stocks. It is not always as easy to do this in other industries. We do not have firms which occupy the position occupied by Courtaulds in the rayon industry, but we would, nevertheless, benefit from an improved flow of information.
Is it enough for the Government simply to exhort people to think, to exhort people to spread their knowledge? I do not think that it is, and the Government's experience of exhortation has perhaps not been too happy in recent years. In any case, looking at the problem from the paint of view of the economy, action has to go further. We have not only to avoid amplifying the cycles of the economy, but we should try to smooth them out.
The new Clause proposes one type of general economic regulator aimed specifically at this problem. The intention is to encourage manufacturers to build up stocks to compensate for a recession in demand for their products, and so maintain full employment and avoid redundancy. It proposes to do this by going some way towards meeting the interest charges which manufacturers would have to bear by holding stock.
Roughly speaking, the manufacturer would benefit for whatever period he held the stock in question, but this help would not be available from the Government except at times when that manufacturer was threatened by recession, and when, in the opinion of the Board of Trade, the recession was temporary. It is, of course, vital that the Board of Trade should act on the right products and at the right time, and the success or failure of this proposal would depend on the dexterity of the Board of Trade.
Suppose a manufacturer increased his stock from 10,000 tons to 11,000 tons. He would receive the sort of allowance I have suggested. It might be in the form of an Income Tax allowance on the cost of that extra 1,000 tons for such time as elapsed until the stock again


fell below 11,000 tons. If hon. Members were able to use a blackboard in the House it would be a little easier to understand this, but I trust that there is no great obscurity involved.
It is important for manufacturers to continue to bear risks to solve the technical problems involved in stocking dif- ferent products. These problems are serious and the new Clause suggests that manufacturers should be left to find the money to finance their stocks. Naturally, the stocks would be held in the normal trade channels.
There is also the question of the definition of what is "the cost". If one could get economists and accountants to agree as to whether or not there was such a thing as a "marginal cost" it would be rather easier to define. As it is, just some broad suggestion might be given by the phrase "the cost incurred in making stock which would not other- wise have been incurred had the stock not been made."
"Subsidy" is not a popular word and I understand that regulators which are specific to a particular industry are hardly more popular with hon. Gentle- men opposite. However, we should distinguish between subsidising particular industries all the time and stimulating any industry at appropriate times. This regulator does not act on the whole volume of production in any industry, but only on the margin that goes into stock, and, therefore, is much cheaper.
How non-specific this regulator would be would depend on the way it was administered. Would it work from an economic point of view? There is in industry a tremendous built-in pressure to reduce stocks. A firm can lose £1 million worth of orders every four years due to not having sufficient stocks, but when the time comes in the trade cycle when it should be building up its stocks again in anticipation of a future rise in demand it is almost invariably argued that the same thing will not happen again, that this time the labour will be available, that new plant will be ready and that there will be no difficulty in the supply of raw materials. How- ever, the firm, for the saving of £10,000 to £20,000 in interest charges, will again lose this £1 million worth of orders.
The events I have described represent the hard experience of industry. They are going on today—at a time when stocks should be being built up in anticipation of the demand we can expect in due course for reasons one should not touch upon in a maiden speech.
As for the cost of such a scheme, the accumulation of stocks in the steel industry seems to depart from the trend by about £40 million and the interest charges to meet this would probably be not more than £2 million a year. In textiles, the departure from the trend seems to be about £30 million. Here, the cost would be only million. For the whole of manufacturing industry it is difficult to estimate the figure, but I would have thought that the departure would be about £400 million, for which the total interest charges might amount to £20 million.
This is an extremely cheap regulator if it would enable us to operate at about £400 million a year nearer the limit of capacity. I think that there is a factor of about 10:20 between the cost of such an anti-cyclical policy and the rewards from it to the economy as a whole, and surely out of that increased production it would be possible for the State to recoup the cost of the regulators either directly from the industries or indirectly from general taxation.
9.45 p.m.
There are, of course, real administrative difficulties in this scheme. I am sure that hon. Members who are not lawyers from time to time take refuge in the remarks made by Lord Keynes at the closing session of the Bretton Woods Conference in the United States. Lord Keynes wrote:
When I first visited Mr. Morgenthau in Washington some three years ago accompanied only by my secretary, the boys in your Treasury curiously inquired of him—where is your lawyer? When it was explained that I had none, 'Who then does your thinking for you?' was the rejoinder. That is not my idea of a lawyer. I want him to tell me to do what I think sensible, and, above all, to devise means by which it will be lawful for me to go on being sensible in unforeseen conditions some years hence.
Having sat through the final embellishments of the speculative gains tax in this Chamber in the last two days, I am filled with marvel at the ingenuity of the


Government draftsmen, and I have not the least doubt that they would find such a Clause as this comic relief after their labours of recent months. I do not defend the particular details of the Clause, and, indeed I do not intend to press it. But there is the broader question of how this fits in with the general pattern of development of economic planning. "Neddy" has been asked to consider the relation of production and capacity, and this will, of course, involve a consideration of stocks; but I am not sure that the Government can really afford to wait for "Neddy" or that this House would wish to do so.
We must, surely, see the economy not just as a black box or, to translate this into non-engineering language, a system of levers to be cunningly manipulated from outside. The economy is men, and it must be the intention of any economic regulator to make men think, and I think that the regulators to which we have been treated, which have simply had the effect of increasing costs and prices, have failed in their function of making men think.
If we are to encourage innovation in industry, we must surely seek innovation in our own approach to industry. We must be willing to experiment. I am sure that the standing of this House will not suffer if we start that process of experimentation in our discussions here.

Sir E. Boyle: It is always a very great pleasure—though anyone as young as myself in the House performs the function with diffidence—to congratulate an hon. Member on his maiden speech. I can say with absolute truth that I congratulate the hon. Member for Middlesbrough, West (Dr. Bray) upon his maiden speech with more pleasure than I have ever known during the ten or eleven years that I have been a Member of this House.
We hear maiden speeches in a number of different kinds of debate. I cannot ever remember a maiden speech by an hon. Member who has treated us to a new idea for a new Clause in a Finance Bill, and those of us who have sat through a number of Finance Bills will know more than anyone else what a particular pleasure it is to hear a speech on those lines. The hon. Gentleman paid a graceful tribute to his predecessor, which I am sure we were

all glad to hear. It is fair to say that Sir Jocelyn Simon was greatly esteemed. admired and liked in all parts of the House for his courtesy and abilities.
The hon. Member has raised tonight a subject of very great importance. I am in a slight difficulty because it is not the custom of the House to debate a maiden speech, but I hope I shall not offend if I make a few comments on the hon. Member's theme and say a few words on the proposed Clause that he has moved.
He has rightly brought up this point about the importance of stock movements to the economy. I am sure that those of us who have tried to follow economic affairs since the war will not need to be persuaded about that. It cannot be stressed too often. It is worth remembering—I put this in a non-controversial way—whatever one thinks of 1949 and the devaluation of the £, that there can be no doubt that stock movements in the United States played a very important part in the events of that year. If one takes the situation of this country in 1955, as I remember, stock movements went the other way. If I have any criticism of the hon. Member's speech, it is that naturally enough he is now concerned with unemployment, but of course an inflationary movement in stock building can be just as important to the economy. It was a supporter of the hon. Member's party, Mr. Robin Marris, of King's College, Cambridge, who said that a stock boom can have an even bigger multiplier effect on the economy than a move in fixed investment. That may well be true.
The hon. Member in this new Clause suggested an idea for a new kind of regulator. What the new Clause amounts to can be put shortly as a system of annual allowances on increases in stocks. More precisely, one might say that the Clause would give allowances for Income Tax purposes of a fraction of the cost of providing and holding stocks of goods, to add to the stocks held at the date of an order from the Board of Trade declaring that it is in the national interest that producers of certain kinds of goods should increase their stocks.
The idea of a regulator based on annual allowances on increases in stocks has real difficulties, but we certainly


should not dismiss it out of hand. After all, twenty years ago when we were, as it were, planning the post-war world, everyone was concerned to even out fluctuations in fixed investment. That was the idea at that time. More recently we have had the regulator to affect consumer expenditure, and now the hon. Member has suggested a regulator to affect stock building. I must say that I think there are difficulties about this, attractive though the idea is at first sight. I will not go through a long list of objections, but I will mention one or two difficulties—first, one or two economic difficulties and then one or two fiscal difficulties.
On the economic side we have to remember that movements even in aggregate stocks are very difficult to identify when they are actually happening. They are difficult to identify until some months after the event. Very few of us—in fact, I think, none of us—no matter which side we were on at the last election, realised that stock building was rising rapidly along with the increase in fixed investment and consumer spending. It is not easy to identify these movements at the time.
Movements in stocks in particular industries, as I am sure the hon. Member will agree, are even less easy to identify. The 'behaviour of what one might call the stock cycle is extremely capricious, and really accurate forecasting is almost impossible, as any one who has seen the work of the Treasury will know well. The reason I mention these points is that it would not be possible to employ a regulator of this kind with very easy or effective timing. That is the difficulty that I see.
The hon. Member made a critical re- mark about the customs regulator. There is one point in its favour, with which I hope he might agree, because it is a point which has been made from the other side of the House as well as from this side. At least, from the point of view of timing one can clap on that regulator and it has a pretty immediate effect on demand. One of the difficulties of a regulator affecting stocks is getting the timing effective.
A second economic point which occurs to me is that there would be no certainty about the objective to aim for in par-

ticular industries in terms of the ratio of stocks to output, and no easy means of knowing in advance whether a given trend in stocks was desirable or not. But that is a complicated point and one which I should be most interested to discuss with the hon. Gentleman at greater length.
10.0 p.m.
Then on the tax side the hon. Member himself realised, I think, the difficulties on general grounds in avoiding discrimination in the use of tax relief on these lines. One obviously could not. The essence of the scheme is that there would have to be discrimination. There really would be. Because even if the general objections could be overcome, since stocks of goods of different kinds frequently move in different directions at the same time, I think the proposal would clearly, if it were to be effective at all, involve discrimination. I am the last person to say we should never have taxation for planning purposes. We have just been discussing, on an earlier Clause, a case where we did have discrimination for planning purposes, but this would be a rather more complicated scheme of discrimination than we have ever had before. I am not saying that that is a conclusive argument against it. I am merely saying it is one of the difficulties one would have to consider.
There are a number of points on the fiscal side I could make, but I do not want to continue further on these lines because, as I say, it is not in this House customary to argue and debate a maiden speech. Therefore, I would conclude by saying that the hon. Member has given us a great deal to think about. He has started in this House with a question closely related to the problems of his constituency. When I read his new Clause I found it interesting. As I listened to his speech tonight I found it even more interesting.

Mr. Callaghan: It is certainly true that we have had discussions about regulators in connection with consumption and in connection with investment, but I cannot myself recall our having discussed the use of a regulator in connection with stocks, and I, too, would like to thank my hon. Friend the Member for Middlesbrough, West (Dr. Bray) for


bringing up this idea, which, I think, we shall undoubtedly want to take further. I do not know what thinking there has been in the Treasury or in "Neddie" about this. I doubt Whether there has been a great deal so far. However, I think that undoubtedly the House will return to this question from time to time, and we may, indeed, even eventually find something done by way of taxation relief. I would not find taxation discrimination in a matter like this too appalling. We have it in a number of ways now. I think the Treasury could develop much mare than it has so far the use of the instrument of taxation for planning purposes.
However, I rise principally to say that I felt that this was an occasion in the House tonight. I regard my hon. Friend —perhaps he should not listen to this—as of the group of other hon. Members who have entered this House recently —I do not particularise—and whom I regard as the harbingers of a new era. Those of us who are jealous about the future prestige of the House—and having been here 17 years, and being now in the second half of the time towards my century, perhaps I may begin to pontificate—want to feel that the House attracts the best men. We cannot do with second-rate men in this House. We want first-rate men, and we want them to be representative of every phase of our national life.
If, in this House, we have been short in any particular way it seems to me we have been short in this—of young managers with technological experience and scientific skill Who literally came here from the jobs they are doing and are able to tell us about their practical problems. I think that my hon. Friend, in company with a number of others who have arrived in this House recently, is a harbinger of a new era.
It is in some ways a solemn thought that they may still be here when the twenty-first century dawns. I do not know what changes they will see if they survive the electorate so long, but I think that the changes which will overtake Britain (luring the next thirty or forty years will demand men of the calibre of the youthful entry we have been getting in the House in the last two or three years. I am thankful to think that the House of Commons can still command

the attention and service of men of first-class ability, and I congratulate my hon. Friend on his speech in the sense that he speaks as the representative of a new generation which has much to offer the House in carrying Britain forward in the second half of the twentieth century.
If I may be so bold, I suggest to him that on a noncontroversial occasion he could hardly expect to carry us into the Division Lobby and that he might therefore consider whether it is not appropriate to withdraw the new Clause, if the House gives him permission to do so.

Dr. Bray: I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

New Clause.—(CERTAIN PENSIONS TO BE TREATED AS EARNED INCOME.)

Where a person has retired from a business which he has carried on by himself or as a partner with others, a pension or annual payment made to him out of the profits of that business shall be treated as earned income for the purposes of income tax.—[Mrs. Butler]

Brought up, and read the First time.

Mrs. Joyce Butler: I beg to move, That the Clause be read a Second time.
When it was decided that pensioners should be entitled to earned income relief, most people assumed that this meant all pensioners, but I understand that the Inland Revenue do not allow it to retired partners and self-employed people. Section 525 (2, b) of the Income Tax Act, 1952, states that earned income includes
any annuity, pension or annual payment to which Section three hundred and seventy-six applies
and the definition in Section 376 is
(1) Where a person has ceased to hold any office or employment and any pension or annual payment is paid to him‥by the person under whom he held office or by whom he was employed or by the successors of that person…
In subsection (2), voluntary pensions or annuities are also included. However, the Inland Revenue argued that a partner or self-employed person did not hold office or employment, so that if, instead of taking a lump sum which would normally be tax-free, a pension is


accepted, this becomes taxable as unearned income. The Inland Revenue regard it in effect as an annuity.
The Clause largely concerns two groups of people. The first—and it was one of these who drew the difficulties to my attention in my constituency—are professional men who are in partnership, or others who are in partnership, but who are not limited companies or companies of any kind. It is true that some of them could form themselves into a limited company, and they would then, as directors, be regarded as employees of the company and would get round the difficulty in this way, but some of these people have professional regulations which prevent them from doing that.
It is, I understand, the practice in some cases where they have these professional regulations and difficulties for them to form themselves into what are known as service companies. Several of them can get together and pool their office resources and staff. Again, they are employees of the company for tax purposes, and when they retire their pensions are regarded as pensions paid to employees and as earned income for the purposes of tax.
Another group of people affected by this are the small traders, business men, often with family businesses, who never have got round to or even thought of forming themselves into companies. Very often they are people who have lived for a very long time in a district. They are engrossed in their business, they are quite successful as small traders and business people, but it does not occur to them, because of their absorption in their work, that they should form a limited company, and probably if it occurred to them they would have no desire to do so. They may be father and son or brothers, or a number of members of a family carrying on business in this way. These difficulties mean that when the head of a business comes to retire he finds, unless he has formed the business into a company, that when he wants to draw his pension he is discriminated against by the tax procedure in that the pension is treated as unearned income.
In addition to the points which I have made on the reasons why people find themselves in this difficulty, it should be

borne in mind that, particularly in an old-established family business, it might not have occurred to the owner that he would face this difficulty. As I seldom intervene in debates on a Finance Bill, perhaps I am in a better position than many of my right hon. and hon. Friends, who are experts in these matters, to appreciate the lack of knowledge of the ordinary person about the workings of Income Tax procedure. It is a shock to many of these people when they come to retire to find that they are treated in this way. They have not realised that there was anything that they could have or should have done about it and they think it unfair when other people receive benefits, because of arrangements they have made, in advance, which they cannot receive.
It should also be borne in mind that in many of these cases the retirement might come about quite suddenly if a man is running his own business with members of his family helping him. I can think of three generations of qualified chemists in my constituency, grandfather, father and son, working in a business very amicably. The grandfather carried on working for many years and for probably much later in life than the ordinary employee would have done.
In these case very often there comes a time when illness suddenly strikes, or there may be some other reason for retirement, such as developments going on in the area or increasing competition when the old man feels that he has had enough and it is time to leave the business to his son who is young enough to stand up to changed conditions. He gets out and it may be a decision taken quite suddenly. He may not have made any special arrangements for his retirement and the son who is left in charge of the business—for under the new Clause it is necessary that there should be no sale of the business—makes some pension arrangement to keep the father in his retirement. It may be quite an informal arrangement nevertheless I submit that it is the kind of arrangement which is often made in these cases.
It should be borne in mind that some of the "top hat" pension schemes are extremely generous in the provision they make for people who retire. The principle of this new Clause, which applies


to people not in that elevated class, is exactly the same. People have been carrying on a job because they are self-employed and because they are not a company. There is no reason why they should be penalised as they are at present. It seems important that the same principle as applies to the "top hat" pension schemes should apply to informal pension arrangements from the profits of the business. It is not a matter of using capital; it is the profits of the business continuing after the owner has retired. People caught in this way have a legitimate grievance against the tax regulations in this sense.
If the Commissioners of Inland Revenue felt that they could not extend Section 376 of the Income Tax Act, 1952, to include persons who had been employed in their own business as their main occupation, the only hope would be for a provision to be passed in this House to include persons who have been actively employed in their own business on similar conditions as if they had been employed by another instead of by themselves. Most business is now carried on by limited companies, so the numbers of retiring self-employed people cannot be very great. I cannot believe that it would be very onerous on the Treasury if this change were made. I suspect that the numbers are dwindling. The numbers of these family businesses are diminishing and they are gradually becoming very small. I do not know what they are, but I suspect that that is so.
In my innocence, I have no doubt that I have overlooked a very important point which makes it impossible for the Government to accept this new Clause, but at this stage I cannot see what that important point is. If the Government are afraid that this might be abused, I should have thought it quite possible to make certain conditions appertain to the application of this Clause which would prevent that abuse. To me, this is a patent injustice which merits legal change. At present, it seems that people who can manoeuvre and behave in a slick way in these matters can get away with something which people who have less knowledge and less expert advice are not able to do.
I do not want to exaggerate this, but it is a point to bear in mind that many

of the people concerned have been in business in their area for a very long time. Many of them have very firmly stood on their own feet. They have desired to be beholden to no one and they have made a contribution to the local community. Very often they are extremely well known and well liked and have done a great deal for their fellow citizens. Although this is a small point it seems to be one which has been overlooked by the Treasury. I hope that the Government will consider it sympathetically.

10.15 p.m.

Sir Barnett Janner: I support the plea made by my hon. Friend the Member for Wood Green (Mrs. Butler). It may well be that the Minister will be able to offer an explanation or some advice to those who retire from a business as to how they can retire in a way which will enable them to have the benefit as earned income of whatever sums are paid to them. As I see it, a person who retires from a business and who is given some sort of pension or allowance is being given a payment for the goodwill which he has built up during his connection with the business. Therefore, in a sense, he could remain a partner or an adviser and still continue to draw an income from the business as a person entitled to receive for his services a payment taxable as earned income.
I gather that my hon. Friend is worried about the many people who go out of a business and who do not make such provision, who do not remain in the partnership, who do not remain as consultants or in some such position which would entitle them to have any income they receive regarded as earned income. They go out not realising that, by retiring in that way, they will be deprived of a benefit which might accrue to them if they retained some sort of loose connection with the business and drew moneys due to them. I use the words "due to them" advisedly, because I regard such money as a payment received, although in a sense it is retrospective, for something for which they have worked and which has been of benefit to the business. The income which comes to a business is derived from goodwill built up in past years and, consequently, it cannot be assessed


as something attaching to the particular year in which the income is, in fact, taken.
Here is another point. If a person wants to have the income regarded as earned income, he has to remain attached to the business. This is not always desirable from the point of view of the business itself because it may sometimes act as a sort of a dead hand on the business. The individual concerned has to participate in some way in the business. While he is a partner or cconsultant,die is entitled to exercise a measure of control over the management. This may sound petty, if one is thinking in terms of large limited liability companies, but it is not petty to the small business man and his family. Sons or daughters carrying on the business may have ideas entirely different from their father. Those ideas may be considerably checked if one of the original partners remains connected and, perforce, interferes in some way with the management.
In my view, the purpose of the new Clause is reasonable. If it is true, as I believe it to be, that a person going out of a business without taking advice which might have enabled him to make provision to have his income regarded as earned income finds himself in an unfortunate position just for that reason, it is only fair that we should provide that what comes to him from the business is regarded as earned income.

Mr. Barber: The hon. Lady the Member for Wood Green (Mrs. Butler) made clear that what she is seeking to do is to provide for earned income relief to annual payments made out of the pro- fits of a business to a former proprietor who has retired. There are two points which I should like to make in preliminary fashion before I deal with the principle involved in her new Clause.
The first is that I agree with her that this is a very important point. It may not be a matter which affects a large number of people, but they are, in the main, I certainly agree with her, a section of society which is worthy of our most careful consideration, because it contributes a great deal to our well-being. The second point is that the hon. Lady spoke, I thought, at one moment, as though the decision not to allow earned income relief in respect of the payments

which she was discussing was in some way a decision of the Commissioners of Inland Revenue.
I ought, therefore, to make it clear that the decision not to allow earned income relief in respect of these payments arises from what, in the view of the Commissioners of Inland Revenue, as they are advised, is a clear provision of the law. It follows, therefore, as she admitted later in her speech, that if we were to do what she wishes it would inevitably mean a change in the law.
The employee's pension, which represents deferred remuneration for services, qualifies for earned income relief under the Section of the Income Tax Act to which she referred, but the payments mentioned in this Clause are not pensions, but annual payments made out of the profits of the business to a former proprietor. They generally represent payments for goodwill, such as the hon. Member for Leicester, North-West (Sir B. James) referred to, or for loss of rights as a partner. It has never been thought proper that they should rank for earned income relief. In substance, they are closely akin to the remuneration of a sleeping partner, who does not do any work, but merely has a right to a share of the profits, and they are distinguishable from an employee's pension, which is, in fact, deferred remuneration for services.

Sir B. Janner: The hon. Gentleman is drawing an analogy with a sleeping partner, who, after all, has nothing to do with the business, whereas such a partner as we are talking about is a partner in it who has taken part in the business and created goodwill.

Mr. Barber: I was only drawing that analogy to point out to the House that at the time when the individual concerned is receiving these annual payments, he is, at that time, at any rate, in the nature of a sleeping partner.
The employee's contract of service with his employer may entitle him either to a salary or to a salary followed by a pension. In the latter case, the pension is essentially part of the remuneration for his services, and it is awarded to him solely because he has rendered those services, but a person in business on his own account or as a member of a partnership receives his earnings in full during his business life.

Mr. Mitchison: I notice that the pro. visions about earned income relief included voluntary pensions, and, sure enough, if we turn to Section 376 of the Act, we find that it is about tax in respect of voluntary pensions. How can they affect remuneration, when they are voluntary?

Mr. Barber: I can only say that, so far as I know, the view of the Commissioners of Inland Revenue, as they have been advised, has never been challenged on this matter. If, of course, the view of the taxpayer was shown to be right, there would be no need for consideration of this new Clause. I do not think that the hon. and learned Gentleman would expect me, on an occasion like this, to go through the Income Tax Act to justify what has already been accepted by the taxpayer.
I will proceed with the principle involved in the proposal. A person who is in business on his own account or who is a member of a partnership receives his earnings in full during his business life without any deferment of part of them until he retires. If he enters into an arrangement under which, instead of receiving capital rights on retirement, he draws annual payments, those payments derive from the arrangement and are not a pension. Nor would I have thought that in any normal sense of the term they would be considered to be earned income. If he drew his capital in full and invested it, the income in retirement from his investment would not be earned income, either.
On the question of equity, because, after all, we should not consider this simply as a legal matter, I should like to mention this to the House. Since 1956, the self-employed have been allowed tax

relief on premiums paid to buy retirement annuities which attract earned income relief. The self-employed are, therefore, not now at any disadvantage in providing for their old age. If earned income relief were to be allowed in respect of the payments described in the Clause, it would enable any trader to sell his business, to accept annual payments instead of capital, and to have those payments treated as earned income.

I doubt very much whether that would be justifiable, because the payments are not earned income, and it could confer a very valuable benefit in many cases. We would not be concerned only with Income Tax, but in many cases we should also be considering relief from Surtax.

I am sorry, in view of the moderate way in which the hon. Lady moved the Clause, that for the reasons which I have given I cannot accede to her request. I hope that she will agree that the arguments which I have advanced are compelling ones and I therefore hope that she will not seek to press the Clause.

Mrs. Butler: I am sorry that the Economic Secretary has not felt able to be more helpful. He suggested that I was rather confused about what the Commissioners of Inland Revenue could do, but it seemed to me that he went on to add to the confusion. This is an important matter and, since the hon. Gentleman has not been able to make any concession, I feel that the matter should be pressed to a Division.

Question put,That the Clause be read a Second time:—

The House divided:Ayes 149, Noes 209.

Clause 6—(PURCHASE TAX.)

Mr. Mitchison: I beg to move, in page 7, line 32, to leave out
or of five per cent.

Mr. Deputy-Speaker (Sir William Anstruther-Gray): The House may debate at the same time the following Amendment in the name of the hon. and learned Member for Kettering (Mr. Mitchison) and the names of other hon. Gentlemen, in page 7, line 33, at end insert
for any reference to a rate of five per cent. a reference to a rate of nil, and".

Mr. Mitchison: That would be convenient, Mr. Deputy Speaker. The effect of that Amendment would be not merely to prevent the increase of the 5 per cent. Purchase Tax to 12½ per cent.—the figure suggested by the Government—but to remove the 5 per cent. altogether.
I will not take up the time of the House at this hour, for the matter is simple. The 5 per cent. Purchase Tax on household necessities, furniture, and so on, and also on what I may call clothing necessities, was imposed by the present Home Secretary when he was Chancellor of the Exchequer.
It was introduced because at the time there was supposed to be one of those crises which appear to be inherent in any Tory Government, and I have never heard any defence of it on the most obvious social grounds. It is really scandalous that people should be made to pay Purchase Tax on the pots and pans which they use in their ordinary domestic lives. It is not only scandalous, but utterly ridiculous that we get a Finance Bill such as this one which at the same time as it increases the tax on ordinary boots and shoes, which are made in my constituency, reduces the tax on motor cars.
What on earth are we coming to, and what is the philosophy of the right hon. and learned Gentleman the Chancellor of the Exchequer when he proceeds to do that? The only reason given for this remarkable anti-social manoeuvre appears to be that it has something or other to do with the Common Market. If it

has not got that reason, it appears to have no reason whatever. The alternative is that the right hon. and learned Gentleman likes playing the concertina, and a concertina effect is being produced by shutting up both ends of the Purchase Tax, or by enlarging it. This was seriously put forward as the real reason for the change in the tax.
What is the sense of this? Is there any reason whatever, unless some urgent national necessity calls for it, to keep any longer a 5 per cent. tax on these necessary, and I was going to say humble, articles of furniture and clothing? I resent this particularly, and if I repeat myself I have the excuse that it involves the livelihood and the continued prosperity of quite a large number of people. I resent this particularly because certainly the boot and shoe trade, and I believe others of the trades affected, are at the moment in no particularly happy condition. They will no doubt be rescued by "Neddy," but while that is happening they may get into quite a lot of trouble, and to choose a moment when these trades are in considerable difficulties and on the brink of serious unemployment, even if they have not reached it, seems to be absolutely mad.
I do not know the reason for the suggested increase. I can find none. I have heard none. I can imagine none. I can see every reason for reducing to nil the tax on these articles, and that is what these Amendments propose. If we are told that we cannot afford it, I come back to the one inevitable and invariable answer to that sort of argument, that this is the year in which £83 million are being allowed to Surtax payers. If the Government choose this year to increase the tax on boots, shoes, ordinary clothing and household goods, they demonstrate beyond any possibility of mistake what kind of Government they are, and the sort of motives which induce the Tory Party to propose changes of this sort.

Mr. Millan: I support my hon. and learned Friend the Member for Kettering (Mr. Mitchison), because this is an extremely important Amendment. My hon. and learned Friend said that he found considerable difficulty in understanding what the Government were doing. I think that we are entitled to an explanation from the Chancellor of


the Exchequer of the Government's intentions about the future of Purchase Tax.
The adjustments which have been made in the Finance Bill this year can hardly be taken by themselves as a sort of tidying up arrangement, which I think is the kind of impression which the Government have been giving, but they can be taken as the first step towards introducing some sort of general sales taxation. I do not intend to go into the details of that aspect of the matter this evening, but it is obviously extremely important that we should be given some idea of what the Government think about this.
It is important to put a value on what the Government have done in raising the 5 per cent. rate to 10 per cent., and it is remarkable that this aspect of their Purchase Tax adjustments has received comparatively little attention. Not many people seem to appreciate just how much revenue is actually involved.
10.45 p.m.
According to the Report of the Commissioners of Customs and Excise for the year ended 31st March, 1961, the amount of net receipts of Purchase Tax taken from goods chargeable at the 5 per cent. rate was £63 million. It follows, therefore, that if that category of goods will in future be charged at 10 per cent., an additional £63 million worth of taxation will be placed on these essential goods. It is for this reason that my hon. Friends have tabled the Amendments. According to the same report, the sort of goods in this category are garments, headgear, footwear, gloves, handkerchiefs, scarves, and most domestic and office furniture.
Certain items of garden furniture might be called luxuries and certainly office furniture does not enter into the cost of living, although I would have thought that this aspect would have appealed to hon. Gentlemen opposite who would not lightly wish to impose additional taxation on industry and commerce. But excluding office and some garden furniture, it is obvious that all the other articles covered in the 5 per cent. category are essential items.
It means that the Government are imposing an additional burden of taxa-

tion to the tune of about £63 million a year on essential goods and, as I have said, it is remarkable that their proposal to increase it to 10 per cent. has attracted so little attention, except, presumably, in constituencies like that of my hon. and learned Friend the Member for Kettering where a local industry is involved. My hon. Friends object to this additional burden being placed on essential goods. We objected when these important consumer items were brought within the scope of Purchase Tax, and we shall continue to object. It is in this spirit that the Amendments were tabled, for they are designed to either leave the rate of Purchase Tax at 5 per cent., to reduce it to nil or to make it one half of 1 per cent. We hope that the Government will move in the direction we propose and not the opposite way.

Mr. Barber: The taxation of clothing and furniture is a matter which rightly concerns all hon. Members, and although we have had only a limited number of speeches from hon. Gentlemen opposite tonight, this matter was touched on by a good many of my hon. Friends when we considered it in Committee.
The two Amendments go to the very root of my right hon. and learned Friend's Budget because they would result in a loss to the Exchequer greater than would have resulted from any other Amendment which I can recall having been seriously put forward since the Budget was introduced. The cost of accepting it would be no less than £136 million in a full year.
The issues involved in the Amendments were considered at length during the four days' debate we had on the Budget. They were referred to many times on Second Reading and then we fully debated the matter in Committee. No one who has sat through our previous debates would accuse me of not dealing thoroughly with the various aspects raised. When I looked at HANSARD to make sure that my remarks this evening would at least be consistent with what I said previously, I saw that my observations lasted for more than nine columns of the OFFICIAL REPORT. I am sure the House would not wish me to go over all the details again this evening.
I think that what I have to do—I think this is most appropriate on Report —is to remind the House briefly what I consider to be the broad considerations which should be borne in mind. The hon. and learned Member for Kettering (Mr. Mitchison) mentioned the structure of Purchase Tax. Nobody will deny that there has been widespread criticism from many quarters of the disparity between the highest and the lowest rates. I will not weary the House by referring to what the position has been over the past few years. Suffice it to say that we have, as a result of successive changes, now reduced the dispartity to that between 45 per cent. at the top and 10 per cent. at the bottom. It is still a large gap, but it is far re- moved from a flat rate, which some other countries seem to favour.
I ask the House to consider the matter from another angle. Last year expenditure on clothing and furniture amounted to more than £1,800 million. Yet it produced only £63 million in tax. On the other hand, £180 million of ex- penditure on radios, television sets and similar items produced more than £44 million of tax. Considered in the con- text of the general form and structure of Purchase Tax, therefore, I believe that the proposals for clothing and furniture are reasonable.
The next point to be considered is the state of the industries concerned. Within a particular industry some sections will be faring better than others. For example, manufacturers of the cheaper furniture, I understand, have not been doing nearly so well as manufacturers of better quality furniture. That is perhaps a sign of the times. But it really cannot be said that, considered overall, the industries with which these Amendments are concerned are doing badly. When I spoke during the Committee stage I gave the actual figures from the index of industrial production. I will not read them now, but perhaps I may be allowed to comment that I believe there is no better guide than that, and that the figures amply support the conclusion that I drew.
The next point that my right hon. and learned Friend obviously had very much in mind when he was considering these proposals was their effect on retail

prices. When I last spoke on this aspect I gave the Committee the best estimate possible of the increase in retail prices which would be attributable to the increase in Purchase Tax. Some hon. Members thought my estimate was of doubtful value. But perhaps I may say that whether I was right or whether they were right, surely a tax at 10 per cent. of the wholesale value is not unreasonable, and taken in conjunction with the reductions in Purchase Tax, it really cannot be said to involve any hardship. After all, as my right hon. and learned Friend pointed out in the Budget debate, a newly-married couple now pay less Purchase Tax on such articles as carpets, floor coverings, refrigerators, washing machines, cutlery, hardware and television sets, and one has to take into account all the changes and not consider merely one item.
Finally, it is not possible to consider the proposal in these Amendments in isolation from the totality of the Budget proposals. I remind the House that the cost of the Amendments would be £136 million a year. To be perfectly frank, when I first saw the Amendments and was told what they would cost, I could not believe that the Opposition were serious, except on one hypothesis—that they had finally abandoned all pretence of a policy designed to tackle inflation.
The hon. and learned Member for Kettering says "What about the Surtax?" First, as my right hon. and learned Friend has pointed out on innumerable occasions, that was paid for largely by the increase in Profits Tax of 2½ per cent. That change in Surtax did no more than bring our rates into line with our competitors such as West Germany.
Finally, I would say this, as the hon. Member for Sowerby (Mr. Houghton) is here. I asked him about the policy of the Labour Party about Surtax. This is what he said in reply to me—and he was, after all, in charge of his side in the debate at the time:
I am not here to say what the Labour Party will do, when it becomes the Government, on Surtax or anything else."—[0mmt. REPORT, 16th May, 1962: Vol. 659, c. 1441.]
We still have not heard from any Member on the Opposition Front Bench just


what their proposals for Surtax are, and I do think it would be invaluable if we were to do so.

Mr. Mitchison: If the hon. Gentleman wants to hear, can I assure him the one thing we shall not do is mulct the house- wife and the ordinary man in order to finance concessions to Surtax payers?

Mr. Nabarro: It is no good at all asking Labour spokesmen what is going to happen. The person who should be asked is the right hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond), sitting there in a luxurious tuxedo of Purchase Tax of 10 per cent. instead of 5 per cent. and heartily supporting the Tory Party's policy.

Mr. Barber: In the context of this de- bate I believe the proposal to increase the lower rates of Purchase Tax from 51 per cent. to 10 per cent. is reasonable, and I believed that to adopt the professed objective of the Labour Party at a cost of £136 million a year would be the height of irresponsibility and I must therefore ask the House to reject this Amendment.

Mr. A. V. Hilton: We on this side of the House and, I am sure, the workers all over the country will be very disappointed at the reply we have just listened to.

Mr. Nabarro: Not in Kidderminster.

Mr. Hilton: I did say on this side of the House and the workers in the country. In my own constituency most of the workers are on the lower scale of wages, and they will be greatly disappointed at the Economic Secretary's reply.
He said there had been very few speeches made from this side in support of this Amendment. The reason is that we were hoping that he would give us some ray of hope, because, after all, Purchase Tax on clothing and furniture is a tax on absolute essentials. They are essential in every working-class home. The hon. Gentleman mentioned that some newly weds would benefit by purchasing such things as refrigerators and carpets. It is the exception rather than the rule for newly-weds in my constituency, people from the farms, to start off

with either refrigerators or carpets. Often they have to wait a long time—{Interruption.] It is all very well for hon. Members opposite to treat this matter as a joke.

Mr. Nabarro: It was a joke.

Mr. Hilton: We have an expert on carpets from Kidderminster —

Mr. Nabarro: What I said had nothing to do with carpets. What 1 said was that the first thing newly-weds must buy is not a refrigerator: it is a bed.

Mr. Hilton: Well, that is the point I was trying to make, and the Purchase Tax on beds is what I am complaining about.
Beds are essential for newly-weds; they cannot do without them, but they have to do without carpets and refrigerators.
11.0 p.m.
The Economic Secretary spoke of the concern of manufacturers of furniture because sales are not as high as they ought to be. This is not surprising to me because of the low wages paid in many areas, for the workers are unable to pay present prices for furniture and other essentials. If the Purchase Tax on clothing and furniture were reduced, there would be a considerable increase in sales. Many people in the countryside on the lower rungs of the wages ladder are being prevented by Purchase Tax from buying the necessities of life.
The Chancellor is present. I had hoped that he would consider this proposal sympathetically. Although we have some things which can be regarded as luxuries, my hon. Friends and I would not object to an increase in Purchase Tax on some of them as long as it were reduced on the essentials which the ordinary worker, and the old-age pensioner and other pensioners, need. They must replace worn-out clothing and furniture. I hope that the Government will 'have second thoughts and will give careful consideration to the proposal.

Question put,That the words "or of five per cent." stand part of the Bill:—

The House divided:Ayes 185, Noes 122.

Division No. 234.]
AYES
[10.28 p.m.


Abse, Leo
Butler, Mrs. Joyce (Wood Green)
Edelman, Maurice


Ainsley, William
Callaghan, James
Edwards, Rt. Hon. Ness (Caerphllly)


Albu, Austen
Cliffs, Michael
Evans, Albert


Allaun, Frank (Salford, E.)
Craddock, George (Bradford, S.)
Femyhough, E.


Allen, Scholefleld (Crewe)
Cronln, John
Fitch, Alan


Awbery, Stan
Croaland, Anthony
Fletcher, Eric


Baxter, William (Stirlingshire, W.)
Cullen, Mrs. Alice
Foot, Dingle (Ipswich)


Bence, Cyril
Dalyell, Tam
Foot, Michael (Ebbw Vale)


Bennett, J. (Glasgow, Brldgeton)
Davies, G. Elfed (Rhondda, E.)
Forman, J. C.


Blackburn, F.
Davles, Ifor (Cower)
Fraser, Thomas (Hamilton)


Blyton, William
Deer, George
Calpern, Sir Myer


Bowden, Rt. Hn. H. W.(Lelcs, s.W.)
Delargy, Hugh
Ginsburg, David


Boyden, James
Dempsey, James
Gordon Walker, Rt. Hon. P. C.


Braddock, Mrs. E. M.
Diamond, John
Greenwood, Anthony


Bray, Dr. Jeremy
Dodds, Norman
Griffiths, W. (Exchange)


Broughton, Dr. A. D. D.
Donnelly, Desmond
Hale, Leslie (Oldham, W.)


Brown, Rt. Hon. George (Belper)
Dugdale, Rt. Hon. John
Hall, Rt. Hn. Glenvli (Colne Valley)




Hamilton, William (Wait Flfe)
McKay, John (Wallsend)
Rodgere, W. T. (Stockton)


Hannan, William
Mackie, John (Enfield, East)
Rogers, G. H. R.(Kensington, N.)


Harper, Joseph
MacMillan, Malcolm (Western Isles)
Ross, William


Hayman, F. H.
MacPherson, Malcolm (Stirllng)
Short, Edward


Henderson, Rt. Hn. Arthur(Rwly Regis)
Mallalleu, E. L. (Brigg)
Silverman, Julius (Aston)


Herblson, Miss Margaret
Mallalleu, J.P.W. (Hudderslield, E.)
Skeffington, Arthur


Hilton, A. V.
Manuel, Archie
Slater, Mrs. Harriet (Stoke, N.)


Holman, Percy
Mapp, Charles
Slater, Joseph (Sedgefield)


Houghton, Douglas
Mason, Roy
Small, William


Howell, Denla (Small Heath)
Mayhew, Christopher
Smith, Ellis (Stoke, S)


Hoy, James H.
Mendelson, J. J.
Spriggs, Leslie


Hunter, A. E.
Millan, Bruce
Stewart, Michael (Fulham)


Irvine, A. J. (Edge Hill)
Milne, Edward
Stones, William


Irving, Sydney (Dartford)
Mitchison, G. R.
Swingler, Stephen


Janner, Sir Barnett
Morris, John
Taverne, D.


Jeger, George
Mulley, Frederick
Taylor, Bernard (Mansfield)


Jenkins, Roy (Stechford)
Neal, Harold
Thompson, Dr. Alan (Dunfermline)


Johnson, Carol (Lewlsham, S.)
Noel-Baker, Francis (Swindon)
Timmons, John


Jones, Dan (Burnley)
Noel-Baker, Rt. Hn. Philip(Derby, S.)
Tomney, Frank


Jones, Elwyn (West Ham, S.)
Oliver, G. H.
Warbey, William


Jones, jack (Rotherham)
Owen, Will
Watklns, Tudor


Jones, J. Idwal (Wrexham)
Padley, W. E.
Weitzman, David


Jones, T. W. (Merioneth)
Pannell, Charles (Leeds, W.)
Wells, William (Walsall, N.)


Kelley, Richard
Pargiter, G. A.
Wilklns, W. A.


Lawson, George
Pavitt, Laurence
Williams, Li. (Abertillery)


Ledger, Ron
Pearson, Arthur (Pontypridd)
Williams, W. R. (Openshaw)


Lee, Frederick (Newton)
Pentland, Norman
Willis, E. G. (Edinburgh, E.)


Lee, Miss Jennie (Cannock)
Popplewell, Ernest
Winterbottom, R. E.


Lever, L. M. (Ardwick)
Price, J. T. (Westhoughton)
Woof, Robert


Lewis, Arthur (West Ham, N.)
Pursey, Cmdr. Harry
Wyatt, Woodrow


Loughlin, Charles
Randall, Harry



Mabon, Dr. J. Dickson
Redhead, E. C.
TELLERS FOR THE AYES:


MacColl, James
Roberts, Albert (Normanton)
Mr. Grey and


Melnnes, James
Robertson, John (Paisley)
Mr. Charles A. Howell




NOES


Agnew, Sir Peter
Duncan, Sir James
Joseph, Sir Keith


Allason, James
Elliot, Capt. Walter (Carshalton)
Kerans, Cdr. J. S.


Atkins, Humphrey
Emery, Peter
Kerr, Sir Hamilton


Barber, Anthony
Errlngton, Sir Eric
Kershaw, Anthony


Barlow, Sir John
Farey-Jones, F. W.
Klmball, Marcus


Batsford, Brian
Fair, John
Kirk, Peter


Bennett, F. M. (Torquay)
Flnlay, Graeme
Langlord-Holt, Sir John


Bennett, Dr. Reginald (Cos &amp;Fhm)
Fisher, Nigel
Leather, Sir Edwin


Berkeley, Humphry
Fraser, Ian (Plymouth, Sutton)
Legge-Bourke, Sir Harry


Bidgood, John C.
Galbralth, Hon. T. G. D.
Lewis, Kenneth (Rutland)


Blffen, John
Gammans, Lady
Lilley, F. J. P.


Biggs-Davlson, John
Gardner, Edward
Linstead, Sir Hugh


Birch, Rt, Hon. Nigel
Gibson-Watt, David
Litchfield, Capt. John


Bishop, F. P.
Gilmour, Sir John
Lloyd, Rt. Hon. Selwyn (Wirral)


Black, Sir Cyril
Glover, Sir Douglas
Longden, Gilbert


Bourne-Arton, A.
Glyn, Dr. Alan (Clapham)
Loveys, Walter H.


Bowen, Roderic (Cardigan)
Goodhart, Philip
Lubbock, Eric


Box, Donald
Cower, Raymond
McLaren, Martin


Boyd-Carpenter, Rt. Hon. John
Green, Alan
Maclean, SirFitzroy(Bute&amp;N. Ayrn.)


Boyle, Sir Edward
Hall, John (Wycombe)
MacLeod, John (Ross &amp;Cromarty)


Brewis, John
Hamilton, Michael (Wellingborough)
M CM aster, Stanley R.


Brooke, Rt. Hon. Henry
Harris, Reader (Heston)
Macmillan, Maurice (Halifax)


Brown, Alan (Tottenham)
Harrison, Col. Sir Harwood (Eye)
Macpherson, Niall (Dumfries)


Buck, Antony
Harvey, John (Walthamstow, E.)
Maddan, Martin


Bullard, Denys
Harvey Anderson, Miss
Maginnis, John E.


Butcher, Sir Herbert
Hastings, Stephen
Maitland, Sir John


Campbell, Gordon (Moray A Nairn)
Hay, John
Manningham-Buller, Rt. Hn. Sir R


Carr, Compton (Barons Court)
Heald, Rt. Hon. Sir Lionel
Markham, Major Sir Frank


Carr, Robert (Mitcham)
Hendry, Forbes
Marten, Nell


Chataway, Christopher
Hlley, Joseph
Matthews, Gordon (Meriden)


Chichester-Clark, R.
Hill, Mrs. Eveline (Wythenshawe)
Mawby, Ray


Clark, William (Nottingham, S.)
Hirst, Geoffrey
Maxwell-Hyslop, R. J.


Cleaver, Leonard
Hobson, Sir John
Maydon, Lt.-Cmdr. S. L. C.


Cooke, Robert
Hocking, Philip N.
Mills, Stratton


Cooper, A. E.
Holland, Philip
Miscampbell, Norman


Cordeaux, Lt.-Col. J. K.
Hooson, H. E.
Montgomery, Fergus


Corfleld, F. V.
Hornby, R. P.
More, Jasper (Ludlow)


Costain, A. P.
Hornsby-Smlth, Rt. Hon. Dame P.
Morgan, William


Coulson, Michael
Howard, Hon. G. R. (St. Ives)
Mott-Radclyffe, Sir Charles


Craddock, Sir Beresford
Howard, John (Southampton, Test)
Nabarro, Gerald


Critchley, Julian
Hughes-Young, Michael
Neave, Airey


Currie, G B. H.
Hulbert, Sir Norman
Nicholls, Sir Harmar


Dance, James
Irvine, Bryant Godman (Rye)
Noble, Michael


d'Avigdor-Goldamld, Sir Henry
James, David
Nugent, Rt. Hon. Sir Richard


Deedes, W. F.
Johnson, Dr. Donald (Carlisle)
Oakshott, Sir Hendrie


de Ferrantl, Basil
Johnson, Eric (Blackley)
Orr, Capt. L. P. S.


Donaldson, Cmdr. C. E. M.
Johnson Smith, Geoffrey
Osborn, John (Hallam)


Doughty, Charles
Jones, Rt. Hn. Aubrey (Hall Green)
Page, John (Harrow, West)







Page, Graham (Crosby)
Skeet, T. H. H.
Tweedsmulr, Lady


Pannell, Norman (Kirkdale)
Smith, Dudley (Br'ntf'd &amp; Chiswick)
van Straubenzee, W. R.


Pearson, Frank (clltheroe)
Smithers, Peter
Vickers, Miss Joan


Percival, lan
Stevens, Geoffrey
Wakefield, Sir Wavell


PicKthorn, Sir Kenneth
Stodart, J. A.
Walder, David


Pitt, Miss Edith
Stoddart-Scott, Cot. sir Malcolm
Walker, Peter


Pott, Percivall
storey, Sir Samuel
Walker-Smith, Rt. Hon. Sir Derk


Price, David (Easlelgh)
Studholme, Sir Henry
Wall, Patrick


Prior, J. M. L.
Talbot. John E
Webster, David


Profumo, Rt. Hon. John
Tapsell peter
Wells, John (Maldstone)


Proudfoot, Wilfred
Taylor Edwin (Bolton E)
Whitelaw, William


Pym, Francis
Taylor Frank (M'ch'st'r, moss side)
Williams, Dudley (Exeter)


Ramsden, James
Taylor, W. J (Bradfor, N.)
Wills, Sir Gerald (Bridgwater)


Redmayne, Rt. Hon. Martin
Teeling, sir William
Wilson, Geoffrey (Truro)


Ridley, Hon. Nicholas
Temple, John M.
Wise, A. R


Roberts, Sir Peter (Heeley)
Thatcher, Mrs. Margaret
Wolrige-Gordon, Patrick


Robinson, Rt. Hn. Sir R. (B'pool, S.)
Thomas, Peter (Conway)
Wood, Rt. Hon. Richard


Rodgers, John (Sevenoaks)
Thompson, Richard (Croydon, S.)
Woodnutt, Mark


Roots, William

Woollam, John


St. Clalr, M.
Tiley, Arthur (Bradford, W.)
Yates, William (The Wreidn)


Sharpies, Richard
Touche, Rt. Hon. Sir Gordon



Shaw, M.
Turner, Colin
TELLERS FOR THE NOES:


Shepherd, William
Turton, Rt. Hon. R. H.
Mr. J. E. B. Hill and Mr. Rees

AYES


Agnew, Sir Peter
Harris, Reader (Heston)
Noble, Michael


Allason, james
Harrison, Col. Sir Harwood (Eye)
Oakshott, Sir Hendrie


Amery, Rt. Hon. Julian
Harvey, John (Walthamstow, E.)
Osborn, John (Hallam)


Atkins, Humphrey
Harvie Anderson, Miss
Page, John (Harrow, west)


Barber, Anthony
Hastings, Stephen
Page, Graham (Crosby)


Barlow, Sir John
Hay, John
Pannell, Norman (Kirkdale)


Batsford, Brian
Heald, Rt. Hon. Sir Lionel
Pearson, Frank (Clitheroe)


Bennett, F. M. (Torquay)
Hendry, Forbes
Percival, Ian


Bennett, Dr. Reginald (Gos &amp;Fhm)
Hiley, Joseph
Pickthorn, Sir Kenneth


Berkeley, Humphry
Hill, Mrs. Evellne (Wythenshawe)
Pott, Percivall


Bldgood, John C.
Hirst, Geoffrey
Price, David (Eastleigh)


Biffen, John
Hobson, Sir John
Prior, J. M. L.


Biggs-Davison, John
Hocking, Philip N.
Proudfoot, Wilfred


Birch, Rt. Hon. Nigel
Holland, Philip
Pym, Francis


Blshop, F. P.
Hooson, H. E.
Ramsden, James


Black, Sir Cyril
Hornby, R. P.
Redmayne, Rt. Hon. Martin


Bourne-Arton, A.
Hornsby-Smith, Rt. Hon. Dame P.
Rees, Hugh


Bowen, Roderic (Cardigan)
Howard, Hon. G. R. (St. Ives)
Ridley, Hon. Nicholas


Box, Donald
Hughes-Young, Michael
Roberts, Sir peter (Heeley)


Boyd-Carpenter, Rt. Hon. John
Irvine, Bryant Godman (Rye)
Roots, William


Boyle. Sir Edward
James, David
St. Clair, M.


Brawls John
Johnson, Dr. Donald (Carlisle)
Sharples Richard


Brooke, Rt. Hon. Henry
Johnson, Eric (Blackley)
Shaw, M.


Brown, Alan (Tottenham)
Johnson Smith, Geoffrey
Shepherd, William


Buck, Antony
Joseph, Sir Keith
Skeet, T. H. H


Bullard, Denys
Kerans, Cdr.J.S
Smith, Dudley (Br'ntf'd &amp;Chiswlck)


Campbell, Cordon (Moray &amp; Nairn)
Kerr Sir Hamllton
Smithers, Peter


Carr, Compton (Barons Court)
Kerashaw, Anthony
Stodart, J. A.


Carr, Robert (Mltcham)
Kimball, Marcus
Stoddart-Scott, Col. Sir Malcolm


Chataway, Christopher
Kirk, Peter
Storey, Sir Samuel


Chlchester-Clark, R
Langford-Holt, Sir John
Studholme, Sir Henry


Clark, Henry (Antrtm, N.)
Legge-Bourke, Sir Harry
Talbot, John E.


Clark, William (Nottingham, S.)
Lewis, Kenneth (Rutland)
Tapsell, Peter


Cleaver, Leonard
Lilley, F.J.P.
Taylor, Edwin (Bolton, E.)


Cordeaux, Lt.-Col. J. K.
Lloyd, Rt. Hon. Selwyn (Wirral)
Taylor, Frank (M'ch'st'r, Moss Side)


Corfield, F. V.
Longden, Gilbert
Teellng, Sir William


Coetain, A. P.
Loveyes, Walter H.
Temple, John M.


Critchley, Julian
Lubbock, Eric
Thomas, Peter (Conway)


Curran, Charlea
Maclean, SirFltzroy(Bute&amp; N. Ayrs.)
Thompson, Richard (Croydon, S.)


Currie, C. B. H
Macleod, Rt. Hn. lain (Enfleld, W.)
Tiley, Arthur (Bradford, W.)


d'Avlgdor-Goldemid, Sir Henry
MacLeod, John (Ross &amp;Cromarty)
Touche, Rt. Hon. Sir Gordon


Donaldson, Cmdr. C E M.
McMaster, Stanley R.
Turner Colin


Doughty, Charles
Macmillian, Macurice (Hallfax)
Turton, nt. Hon. R. H.


Duncan, Sir James
Macrnillan, Maurice (Hallfax)
van Straubenzee, W. R.


Elliot, Capt. Walter (Carehalton)
Maddan, Martin
Vaughan-Morgan, Rt. Hon. Sir John


Emery, Peter
Macpherson, Niall (Dumfries)
Walder, David


Errlngton, Sir Eric
Maginnis, Jonn E
Walker, Peter


Farr, John
Manningham -Buller Rt Hn Sir R
Walker-Smith, Rt. Hon. Sir Derek


Flnlay, Graeme
Markham, Major Sir Frank
Wall, Patrick Webster,


Fisher, Nigel
Matthews, Major Sir Frank
Webstar, David


Fraser, Ian (Plymouth, Sutton)
Matthews, Gordon (Meriden)
Wells, John (Maidstone)


Gaibraith, Hon. T. G. D.
Mawby, Ray
Whitelaw, William


Cammans, Lady
Maxwell-Hyslop, R. J.
Williams, Dudley (Exeter)


Gardner, Edward
Maydon, Lt.-Cmdr. S. L. C.
Wills, Sir Gerald (Brldgwater)


Gibson-Watt, David
Mills, Stratton
Wilson, Geoffrey (Truro)


Gllmour, Sir John
Mlscampbell, Norman
Wise, A. R.


Glover, Sir Douglas
Montgomery, Fergus
Wolrige-Gordon, Patrick


Goodhart, Philip
More, Jasper (Ludlow)
Wood, Rt. Hon. Richard


Cower, Raymond
Morgan, William
Woodnutt, Mark


Green, Alan
Mott-Radciyffe, Sir Charles



Crlmond, Rt. Hon. J.
Nabarro, Gerald
TELLERS FOR THE AYES:


Hall, John (Wycombe)
Neave, Alrey
Mr. J. E. B. Hill and


Hamilton, Michael (Weillngborough)
Nicholls, Sir Hamar
Mr. Martin McLaren.




NOES


Abse, Leo
Craddock, George (Bradford, S.)
Fitch, Alan


Ainsley, William
Cronin, John
Fletcher, Eric


Albu, Austen
Crosland, Anthony
Foot, Dingle (Ipswich)


Allaun, Frank (Salford, E.)
Cullen, Mrs. Alice
Foot, Michael (Ebbw Vale)


Allen, Scholefield (Crewe)
Dalyell, Tam
Forman, J. C.


Awbery, Stan
Davles, G. Elfed (Rhondda, E.)
Fraser, Thomas (Hamilton)


Baxter, William (Stirlingshire, W.)
Delargy, Hugh
Galtskell, Rt. Hon. Hugh


Bennett, J. (Glasgow, Bridgeton)
Dempsey, James
Galpern, Sir Myer


Blackburn, F.
Diamond, John
Ginsburg, David


Blyton, William
Dodds, Norman
Greenwood, Anthony


Bowden.Rt. Hn. H. W. (Leics, S.W.)
Donnelly, Desmond
Griffiths, W. (Exchange)


Braddock, Mrs. E. M.
Dugdale, Rt. Hon. John
Hannan, William


Bray, Dr. Jeremy
Edelman, Maurice
Harper, Joseph


Broughton, Dr. A. D D.
Edwards, Rt. Hon. Ness (Caerphilly)
Hay man, F. H.


Callaghan, James
Evans, Albert
Henderson, Rt. Hn. Arthur(RwlyRegtS)


Cllffe, Michael
Fernyhough, E.
Herblson, Miss Margaret







Hilton, A. V.
Mackie, John (Enfield, East)
Ross, William


Holman, Percy
MacPherson, Malcolm (Stirling)
Short, Edward


Houghton, Douglas
Mallalieu, E. L. (Brigg)
Skeffington, Arthur


Howell, Charles A. (Perry Barr)
Manuel, Archie
Slater, Mrs. Harriet (Stoke, N.)


Howell, Denis (Small Heath)
Marsh, Richard
Slater, Joseph (Sedgefleld)


Hoy, James H.
Millan, Bruce
Small, William


Irvine, A. J. (Edge Hill)
Milne, Edward
Soskice, Rt. Hon. Sir Frank


Irving, Sydney (Dartford)
Mitchison, G. R.
Spriggs, Leslie


Janner, Sir Barnett
Morris, John
Stewart, Michael (Fulham)


Jeger, George
Noel-Baker, Francis (Swindon)
Swingler, Stephen


Jenkins, Roy (Steohford)
Noel-Baker, Rt.Hn.Philip(Derby,S.)
Taverne, D.


Jones, Dan (Burnley)
Ollvwr, G.H.
Taylor, Bernard (Mansfield)


Jones, Elwyn (West Ham, S.)
Padley, W. E.
Thompson, Dr. Alan (Dunfermllne)


Jones, Jack (Rotherham)

Warbey, William


Jones, J. Idwal (Wrexham)
Pargiter,G.A.
Watkins, Tudor


Jones, T. W. (Merioneth)
Pavitt, Laurence
Weltzman, David


Lawson, George
Pearson, Arthur (Pontypridd)
Wigg, George


Ledger, Ron
Pentland, Norman
Wilkins, W. A.


Lee, Frederick (Newton)
Price, J. T. (Westhoughton)
Williams, W. R. (Openshaw)


Lever, L. M. (Ardwick)
Randall, Harry
Willis, E. G. (Edinburgh, E.)


Lewis, Arthur (West Ham, N.)
Redhead, E. C.
Winterbottom, R. E.


Loughlin Charles
Rhodes, H.
Woof, Robert


Mabon, Dr. J. Dickson
Roberts, Albert (Normanton)
Wyatt, Woodrow


MacColl, James
Robertson, John (Paisley)



Mclnnea, James
Rodgers, W. T. (Stockton)
TELLERS FOR THE NOES:


McKay, John (Wallsend)
Rogers,G. H. R. (Kensington, N.)
Mr. Ifor Davies and Mr. Charles Grey.

Mr. Mitchison: I beg to move, in page 7, line 37, to leave out paragraph (b).

Mr. Deputy-Speaker: With this Amendment, it will be possible to discuss the Amendment to the Eighth Schedule, page 51, leave out lines 14 to 48.

Mr. Mitchison: This is an Amendment to remove the tax which it is sought to impose on sweets, soft drinks and the like. This is an amazing Finance Bill. We are engaged in a financial crisis. The right hon. and learned Gentleman cannot afford this and cannot afford that. Busy in saving the economy and rescuing the nation, with the assistance or under the directions of "Neddy", 'this is his main instrument for the purpose. This is a tax to yield £30 million this year and £50 million in a full year on ordinary sweets and ordinary soft drinks. It is not until the latest financial crisis has come upon us that any Government have thought it necessary to tax any of these things, but this now remains the only method of saving the country.
It is, as I see it, the largest item of taxation, certainly the largest item of personal taxation, in the whole of this Finance Bill. There is not much more to be said about that than that it is utterly ridiculous, that it shows the straits to which the Government and the Treasury have apparently been driven and that it throws a lurid light on the complete absence of even a sense of humour in those who are charged with directing the financial fortunes of the

country at the moment. There is nothing whatever to be said for this tax. If the Government cannot think of anything better than this to rescue the nation, they had better resign at once.
That is the point about this Amendment and this tax. There is no more to be said for it. I do not suppose for a moment that even at this late hour the Government will see how ridiculous the tax is, how particularly ridiculous it is in a year when they are remitting £83 million to Surtax payers. What utter idiots they are making of themselves and their party by relying on this kind of tax to rescue the country from the financial difficulties into which their own policy has plunged it.

11.15 p.m.

Mr. Barber: I said that the subject of the last series of Amendments had been discussed at all stages since the introduction of the Budget. The same observation is true of the tax on confectionery. soft drinks and ice cream. When this tax was considered in Committee my right hon. and learned Friend the Chancellor replied to the debate himself, and the Amendments to which he replied on that occasion were identical in effect with those we are considering now. I shall, therefore, follow the example of the hon. and learned Member for Kettering (Mr. Mitchison) and deal with the matter briefly.
What are the basic facts on which any fair consideration of the matter must depend? The British people are at present spending £300 million a year on confectionery, £100 million a year on


soft drinks and £75 million a year on ice cream. Our consumption of chocolate and sugar confectionery is the highest in the world. The average for every man, woman and child in the country is half a pound a week. In the United States, the figure is 5 ozs. and in Western Germany it is 4 ozs. These are the facts, and the question to be considered is whether the extension of Purchase Tax to these three commodities is fair.
The reason for the extension was put concisely and frankly by my right hon. and learned Friend on 16th May when he said:
The hon. and learned Member for Kettering (Mr. Mitchison) asked me the reasons for this tax. The answer is money. It is to obtain revenue. If we did not put this tax on we should have to put some other tax on to obtain the revenue in another way "—[OFFICIAL REPORT, 16th May, 1962; Vol. 659, c. 1475.]
It is said that the tax is unfair, particularly to old-age pensioners, children and so on. We have been into this in considerable detail. Anyone who honestly and objectively looks at the facts will agree that this tax will not impose any intolerable burden or hardship on any of these groups of people.

Mr. Mitchison: On that point, is the hon. Gentleman aware that the effect of the tax is to cause manufacturers and others to put up prices far beyond the actual increase called for by the imposition of the tax? If he goes into the tea room and asks for a bottle of mineral water, he will find that he is charged half as much again as he would have been before the tax was imposed.

Mr. Barber: It is true—it is a matter of common observation—that price increases have varied as between one product and another. I can only say to the House that, as I am sure hon. Members know, the confectionery industry is one of the most competitive of industries, and I have no doubt at all that, with the passage of time, these prices will settle down.

Mr. Callaghan: Settle up.

Mr. Barber: This is not a case where one is dealing with a monopoly or even a near-monopoly. It is a highly competitive industry.
I was about to say that, in the course of our debates, hon. Members have

spoken sometimes as though there was something almost immoral about this extension of tax. The surprising thing, I suggest, is that confectionery, ice cream and soft drinks have not been made liable to Purchase Tax before. Since we last debated the matter, I have made inquiries, and I find that most of the E F T A. countries tax them. All the Common Market countries tax them. In France, for instance, they are taxed at a rate equivalent to a Purchase Tax at 25 per cent. In Sweden, which no one will consider to be a backward country, the tax burden is even higher, equivalent to a Purchase Tax of about 150 per cent. It has frequently been suggested that we should broaden the base of Purchase Tax. This is a range of goods which by and large certainly are not necessities. Given the fact that it was necessary to raise the revenue, I do not believe that the country considers it unreasonable to select these goods for liability to Purchase Tax.
Of course my right hon. and learned Friend considered very carefully the effect of the tax, both on the consumer and on the industries concerned. He concluded that the standard rate of 25 per cent. would be too high. He therefore decided on a new and a modest rate of 15 per cent. I said at the outset that the Amendments would cost the Exchequer £50 million in a full year and that the Amendments are identical in effect with those moved in Committee. Nothing since our discussion in Committee on Amendments with the identical effect has caused my right hon. and learned Friend to change his mind. I would therefore like to remind the House of my right hon. and learned Friend's concluding remarks on that occasion. He said:
I think that the tax is common sense, that it is fair, and that it is reasonable. As long as we have these taxes on the necessities, or near necessities, I think that it is entirely right and proper that this very large field of consumption, which is not absolutely essential consumption, should also bear its share of the national burden. I therefore commend this tax to the Committee."—[OFFICIAL REPORT, 16th May, 1962; Vol. 659, c. 1478.]
I do likewise and therefore ask the House to reject these Amendments.

Mr. W. A. Wilkins: May I ask you, Mr. Deputy-Speaker, whether this would be the appropriate


moment to discuss the Amendments in page 51, line 27, at end insert:
(4) Chocolate specially prepared for con- sumption by diabetics;
and in page 51, line 32, after second beverages", insert "specially prepared for consumption by diabetics".

Mr. Deputy-Speaker (Sir Robert Grimston): They will be called separately at the end of the debate.

Mr. Peter Emery: There is one part of this enactment about which I am not at all happy and which I had hoped that the Government would have reconsidered. I refer to the inclusion of chocolate biscuits in the Clause with sweets and soft drinks. Nobody will be surprised to hear that Huntley and Palmer is part of Reading. Its tradition goes back much longer than the tradition of the constituencies represented by many hon. Members. It is, therefore, in close conjunction with the firm that I draw the attention of the Treasury to the fact that this is the first time, the war being no exception, when chocolate biscuits have been classed as sweets. I believe that it has been done in this Measure only because the Treasury can- not see a way of distinguishing between some sweets which have biscuits in them and the ordinary chocolate biscuits which are considered to be a basic food and, indeed, part of the ordinary luxuries of the nursery, even in the poorest home in the land.
It should not be beyond the wit of my right non. and hon. Friends on the Front Bench to devise a method of distinguishing between the two. The Government were able to do it during the war by keeping chocolate biscuits which are used as food on a points system as distinct from the chocolate biscuits which are sold as sweets, which went on the sweet coupons. It was possible to do that during the war, and it should have been possible for the Government to have found some method of doing this in peacetime.

Mr. Mitchison: On a point of order. This speech would no doubt be in order on an Amendment to omit chocolate biscuits, but so far I have been entirely unable to discover whether the hon. Member supports or opposes the Amend-

ment. In these circumstances, I suggest that so far this speech is out of order.

Mr. Deputy-Speaker: I do not find the speech out of order. It often happens that we do not know which way a Member will come down until towards the end of his speech.

Mr. Emery: I am always delighted to have interjections from the hon. and learned Member for Kettering (Mr. Mitchison). I have had to listen to him many times for much longer to get to his points than he will have to listen to the whole of my speech.
In considering chocolate biscuits on the Amendment, it might have been much more fortunate if we could have had an assurance from the Government that they will continue to consider the matter, because unless I can have an assurance of that nature I will have to consider fully whether, even at this late hour, while wishing to expedite business as much as is humanly passible, I can support my right hon. Friends on the Front Bench. If they will assure the biscuit industry that this matter will be permanently kept under review, I will have great pleasure in being able to support them.

Mr. John Diamond: The hon. Member for, I think, one of the Reading constituencies—

Mr. Arthur Lewis: For Huntley and Palmer's.

Mr. Diamond: I thought I was right. It is one of the constituencies which one associates with the biscuit industry. The hon. Member has raised a point which, in addition to being a perfectly valid constituency point, which we all fully recognise, is a point of extreme importance, because he is drawing attention to the fact that the Government are taxing food.
The Government have so far taxed ice cream. There was a time when ice cream was, perhaps, regarded not as an essential food and not as part of a normal diet, but one has only to think of the amount of ice cream consumed by hon. Members regularly in the House of Commons with every meal—

Mr. Nabarro: Talk about yourself. Not me.

Mr. Diamond: The hon. Member for Kidderminster (Mr. Nabarro) reminds me that there are two categories of hon. Member: (a) the hon. Member for Kidderminster and (b) the rest of us.
One has only to notice the amount of ice cream consumed by hon. Members in this building, and one knows that in every private house there is regularly with part of a meal at some time or other an ice-cream sweet of some kind which is part of the regular diet.
The hon. Member for Reading (Mr. Peter Emery) points out accurately that the Government are now starting to tax food and that when there is the slightest administrative difficulty in differentiating between a foodstuff and confectionery, they are not prepared to take the trouble of differentiating because they are prepared to tax food. This is another reason why we should strongly object to their proposal. I find myself entirely in support of the hon. Member for Reading notwithstanding that the largest ice-cream factory is in the constituency of Gloucester.

Mr. Wilkins: It may be that what my hon. Friend the Member for Gloucester (Mr. Diamond) has said about the taxation of confectionery will find an echo in the minds of many hon. Members. I want, however, to bring to the notice of the Economic Secretary to the Treasury the question of how this tax affects people who suffer from diabetes.
11.30 p.m.
Here is an exception to the general rule which is applied by these proposals. Here are people who may consume only a product which has to be specially prepared for them. I am talking of diabetic chocolate and squash, two preparations which have to be specially prepared for these people.

Mr. Deputy-Speaker: Order. I am sorry to interrupt the hon. Gentleman, but this is exactly what a later Amendment in his name, to the Eighth Schedule, is about, and I think that discussion of it had better take place on that Amendment.

Mr. Mitchison: On a point of order, Mr. Deputy-Speaker. I do not find anything about diabetic squash in that Amendment or the following one.

Mr. Deputy-Speaker: I think that we can bring that in under the Amendment I have referred to.

Mr. Mitchison: With respect, can we? I do not know what diabetic squash is, but it does not appear to be diabetic chocolate, to which the Amendment you mention refers.

Mr. Deputy-Speaker: I think that diabetic squash would come under the following Amendment, which refers to beverages prepared for diabetics.

Mr. Mitchison: Further to that point of order. We have just been told, in a long speech, about chocolate biscuits. Is not the only ground, apparently, for ruling my hon. Friend out of order, or suggesting that what he is saying is out of order, that there is a later Amendment dealing with these matters? But I can find no Amendment dealing with diabetic squash.

Mr. Deputy-Speaker: In my opinion, diabetic squash can be discussed under the Amendment dealing with beverages. That is my Ruling.

Mr. Wilkins: I had originally though of challenging this item on the question of whether this squash was a medicine. It is, of course, retailed by chemists. It is not retailed in the ordinary way in confectionery shops and one might be able to argue, with some success, that it should be brought into the category of medicine. The people for whom I plead are those who, in almost every case, already have to find 4s. per week for prescription charges. This new tax is therefore a serious matter for them.

Mr. Deputy-Speaker: Order, I must insist that this matter is discussable on the two later Amendments I have mentioned. We cannot have the discussion twice over and therefore I rule that it must take place later.

The Question is—

Mr. Callaghan: On a point of order. Are we not to have a reply?

Mr. Barber: I am afraid that I did not rise because I was concentrating on the remarks of the hon. Member for Bristol, South (Mr. Wilkins) about diabetics. If I cannot deal with that now, perhaps I might say a word about the


only other matter which has been raised since I spoke, the question of chocolate biscuits.
This was a matter which we considered with great care. because obviously it was an important decision to extend the tax from what one might call normal confectionery to take in chocolate biscuits as well. The reason we decided to do this was simple. It was because chocolate biscuits are, as many hon. Members know, put up for sale in a wide variety of forms, and it is quite impracticable to draw a dividing line between them. I suppose that it would not be appropriate for me to mention the particular types of chocolate biscuits which may be purchased and which compete directly with what I might call ordinary chocolate confectionery.

Sir B. Janner: Nonsense.

Mr. Barber: The hon. Member shouts "nonsense," but if he will buy a bar of Kit-kat he will see what I mean.

Sir B. Janner: I sympathise with the difficulty the hon. Member finds himself in. I also have in my constituency biscuit producers who will regard their chocolate biscuits not as a luxury but as a food. Why does not the hon. Gentleman realise that he ought not to tax foods under the heading of confectionery?

Mr. Barber: I was only pulling the hon. Gentleman's leg.

I was saying that if we had left out chocolate biscuits from the charge to tax there would have been serious distortion of the pattern of the chocolate confectionery trade.

With regard to the position during the war, to which my hon. Friend the Member for Reading (Mr. Peter Emery) referred, this was, of course, something which we considered and, without going into details, the pattern of trade in chocolate confectionery and chocolate biscuits has changed very much since those days. After the fullest consideration we came to the conclusion that it would be wrong to leave chocolate biscuits out of this tax, having decided to include ordinary confectionery.

Mr. Peter Emery: Before my hon. Friend sits down, can he go one step further and say how he draws the line between a mixture which is cake and a mixture which is biscuit? A chocolate covering on something which is cake is not taxed. A chocolate covering on something that is biscuit is taxed, and I am informed that it is very easy to mix the biscuit with the cake.

Mr. Barber: I can only assure my hon. Friend that other biscuits, cakes and pastries are outside the scope of the tax.

Question put,That the words proposed to be left out stand part of the Bill: —

The House divided:Ayes 161, Noes 101.

Division No. 236.]
AYES
[11.37 p.m.


Agnew, Sir Peter
Chlchester-Clark, R.
Glover, Sir Douglas


Allason, Jamea
Clark, William (Nottingham, S.)
Goodhart, Philip


Amery, Rt. Hon. Julian
Cleaver, Leonard
Gower, Raymond


AtKlns, Humphrey
Cordeaux, Lt.-Col. J. K.
Green, Alan


Barber, Anthony
Cordle, John
Hall, John (Wycombe)


Batsforcf, Brian
Corfleld, F. V.
Hamilton, Michael (Wellingborough)


Bennett, F. M. (Torquay)
Costain, A. P.
Harris, Reader (Heston)


Berkeley, Humphry
Critchley, Julian
Harrison, Col. Sir Harwood (Eye)


Bldgood, John C.
Curran, Charles
Harvey, John (Walthamstow, E.)


Biffen, John
Currie, G. B. H.
Hastings, Stephen


Biggs-Davlson, John
d'Avlgdor-Goldsmld, Sir Henry
Heald, Rt. Hon. Sir Lionel


Birch, Bt. Hon. Nigel
Donaldson, Cmdr. C. E. M.
Hendry, Forbes


Bishop, F. P.
Doughty, Charles
Hill, Mrs. Eveline (Wythenshawe)


Black, Sir Cyril
Drayson, C. B.
Hill, J. E. B. (S. Norfolk)


Bossom, Clive
Duncan, Sir James
Hirst, Geoffrey


Bourne-Arton, A,
Eden, John
Hobson, Sir John


Box, Donald
Elliot, Capt. Walter (Carshalton)
Hocking, Philip N


Boyd-Carpenter, Rt. Hon. John
Errington, Sir Eric
Holland, Philip


Boyle, Sir Edward
Farr, John
Hornsby-Smith, Rt. Hon. Dame P.


Brooke, Rt. Hon. Henry
Fisher, Nigel
Howard, Hon. G. R. (St. Ives)


Brown, Alan (Tottenham)
Fraser, Ian (Plymouth, Sutton)
Hughes-Young, Michael


Buck, Antony
Galbraith, Hon. T. G. D.
Irvine, Bryant Godman (Rye)


Campbell, Cordon (Moray &amp; Nairn)
Gammans, Lady
James, David


Carr, compton (Barons Court)
Gibson-Watt, David
Johnson, Dr. Donald (Carlisle)


Chataway, Christopher
Gilmour, Sir John
Johnson, Eric (Blackley)




Johnson Smith, Geoffrey
More, Jasper (Ludlow)
Storey, Sir Samuel


Joseph, Sir Keith
Morgan, William
Talbot, John E.


Kerans, Cdr J. S
Mott-Radclyffe, Sir Charles
Tapsell, Peter


Kimball. Marcus
Nabarro, Gerald
Taylor, Frank (M'ch'st'r, Moss Side)


Kirk, Peter
Neave, Airey
Teeling, Sir William


Langford-Holt, Sir John
Noble, Michael
Temple, John M.


Legge-Bourke, Sir Harry
Oakshott, Sir Hendrie
Thomas, Peter (Conway)


Lewis, Kenneth (Rutland)
Osborn, John (Hallam)
Thompson, Richard (Croydon, S.)


Lilley, F. J. P.
Page, John (Harrow, West)
Tiley, Arthur (Bradford, W.)


Litchfleld, Capt. John
Page, Graham (Crosby)
Touche, Rt. Hon. Sir Gordon


Lloyd, Rt. Hon. Selwyn (Wirral)
Pannell, Norman (Kirkdale)
Turner, Colin


Longden, Gilbert
Pearson, Frank (Clitheroe)
Turton, Rt. Hon. R. H.


Loveys Walter H
Pickthorn, Sir Kenneth
van Straubenzee, W. R.


McLaren, Martin
Pott, Percivall
Vaughan-Morgan, Rt. Hon. Sir John


Macleod, Rt. Hn. Iain (Enfield, W.)
Price, David (Eastleigh)
Walder, David


McMaster, Stanley R.
Prior, J. M. L.
Walker, Peter


Macmillan, Maurice (Halifax)
Proudfoot, Wilfred
Wall, Patrick


Macpherson, Niall (Dumfries)
Pym, Francis
Webster, David


Maddan, Martin
Redmayne, Rt. Hon. Martin
Wells, John (Maidstone)


Maginnls, John E.
Ridley, Hon. Nicholas
Whitelaw, William


Maitland, Sir John
Roberts, Sir Peter (Heeley)
Williams, Dudley (Exeter)


Manningham-Buller, Rt. Hn. Sir R.
Roots, William
Wilson, Geoffrey (Truro)


Markham, Major Sir Frank
Sharpies, Richard
Wise, A. R.


Matthews, Gordon (Meriden)
Shaw, M.
Wood, Rt. Hon. Richard


Mawby, Ray
Shepherd, William
Woodnutt, Mark


Maxwell-Hyslop, R. J.
8keet, T. H. H.



Maydon, Lt.-Cmdr. s. L. C.
Smith, Dudley (Br'ntf'd &amp; Chlswick)
TELLERS FOR THE AYES


Mills, Stratum
Smithers, Peter
Mr. Finlay and


Miscampbell, Norman
Stodart, J. A.
Mr. Rees.


Montgomery, Fergus
Stoddart-Scott, Col. Sir Malcolm





NOES


Abse, Leo
Galpem, Sir Myer
Milne, Edward


Alnsley, William
Greenwood, Anthony
Mitchison, G. R.


Albu, Austen
Grey, Charles
Noel-Baker, Francis (Swindon)


Allen, Scholefield (Crewe)
Griffiths, W. (Exchange;
Noel-Baker,Rt.Hn.Phllip(Derby,S.)


Awbery, Stan
Grimond, Rt. Hon. J.
Padley, W. E.


Baxter, William (Stirlingshire, W.)
Hannan, William
Pargiter, G. A.


Bennett, J. (Glasgow, Bridgeton)
Harper, Joseph
Pavitt, Laurence


Blackburn, F.
Hayman, F. H
Pentland, Norman


Bowden, Rt. Hn. H.W. (Leics. S.W.)
Henderson, Rt. hn. Arthur(RwlyRegls)
Price, J. T. (westhoughton)


Bowen, Rodenc (Cardigan)
Herbison, Miss Margaret
Randall, Harry


BraddocK, Mrs. E. M.
Hilton, A. V.
Redhead, E. C.


Bray, Dr. Jeremy
Holman, Percy



Broughton, Dr. A. D. D.
Hooson, H. E.
Rhodes, H.


Callaghan, James
Houghton, Douglas
Rodgers, W. T. (Stockton)



Howell, Charles A. (Perry Barr)
Rogers, G. H. R. (Kensington, N.)


Cliffe, Michael
Howell, Denis (Small Heath)
Ross, William


Craddock, George (Bradford, S.)
Hoy, James H.
Short, Edward


Cronin, John
Hynd, John (Attercliffe)
Skeffington, Arthur


Crosland, Anthony
Irving, Sydney (Dartford)
Slater, Mrs. Harriet (Stoke, N.)


Cullen, Mrs. Alice
Janner, Sir Barnett
Small, William


Dalyeli, Tam
Jeger, George
Soskice, Rt. Hon. Sir Frank


Davies, G. El led (Rhondda, E.)
Jones, Elwyn (West Ham, S.)
Spriggs, Leslie


Delargy, Hugh
Ledger, Ron
Stewart, Michael (Fulham)


Diamond, John
Lee, Frederick (Newton)
Taylor, Bernard (Mansfield)


Dodds, Norman
Lever, L. M. (Ardwick)
Warbey, William


Dugdale, Rt. Hon. John
Lewis, Arthur (West Ham, N.)
Watkins, Tudor


Edelman, Maurice
Loughlin, Charles
Weitzman, David


Evans, Albert
Lubbook, Eric
Wllkins, W. A.


Fernyhough, E.
Mabon, Dr. J. Dickson
Williams, W. R. (Openshaw)


Fitch, Alan
MacColl, James
Willis, E. G. (Edinburgh, E.)


Fletcher, Eric
Mclnnes, James
Winterbottom, R. E.


Foot, Dingle (Ipswich)
MacKie, John (Enfield, East)
Wyatt, Woodrow


Foot, Michael (Ebbw Vale)
Macpherson, Malcolm (Stirling)



Forman, j. C.
Mallalieu, E. L. (Brigg)
TELLERS FOR THE NOES:


Fraser, Thomas (Hamilton)
Manuel, Archie
Mr. Lawson and


Gaitskell, Rt. Hon. Hugh
Millan, Bruce
Mr. Ifor Davies.

Clause ll.—(GENERAL OPERATION OF
CHARGE.)

11.45 p.m.

Mr. Barber: I beg to move, in page 15, line 31, at the end to insert:
Provided that a body corporate carrying on a business which consists of or includes the management of trusts, and acting as trustee of a trust in the course of that business, shall be treated in relation to that trust as not resident in the United Kingdom if the whole

of the settled property consists of or derives from property provided by a person not at the time (or, in the case of a trust arising under a testamentary disposition or on an intestacy or partial intestacy, at his death) domiciled, resident or ordinarily resident in the United Kingdom.
The Amendment is concerned with the liability of trusts administered overseas by companies resident in the United Kingdom to tax under Case VII. Clause


11 (6) provides, in effect, that the trustees of a settlement shall be treated as resident and ordinarily resident in this country and taxed on short-term gains accruing to the settled funds if the general administration of the trusts is ordinarily carried on here or if the trustees or a majority of them are resident and ordinarily resident here.
It has been put to us that where a trustee company resident here carries on a trust business overseas through branches of its trustee department in an overseas country, this provision unfairly imposes a liability to Case VII tax in respect of trusts administered overseas simply because the company itself is resident in the United Kingdom.
This point is a good one in principle because the trusts in question are, in fact, at least in the general run, trusts set up by person having no connection with this country, and the ordinary administration of the trusts is carried on abroad It seems wrong that the trusts should be liable to tax on any short-term gains they make simply because the person setting up the trust has decided to employ as his trustee an overseas branch of a British trustee company.
What is causing concern is not that the trusts will on rare occasions have some tax to pay but the danger that the theoretical liability to Case VII tax on trusts administered by United Kingdom companies will discourage overseas settlors from employing them as trustees. I understand that there is strong competition in this field from foreign concerns; and it is feared that the possibility of Case VII liability if a United Kingdom company is appointed as trustee may induce local residents not to set up trusts with a United Kingdom company as trustee.
I am sure that hon. Members will agree that we should not run the risk that the overseas business of United Kingdom trust companies may be handicapped in this way, and this Amendment has been tabled to allow an exemption for trusts of the type to which I have referred.

Mr. Diamond: This seems to me to be an Amendment which should cause no delay at this late hour. I should have thought that we would all be pre-

pared to accept it as a perfectly sensible help particularly for those institutions which want to cater abroad and which we would want to encourage so to do.

Amendment agreed to.

Clause 15.—(SUPPLEMENTARY.)

The Attorney-General (Sir Reginald Manningham-Buller): I beg to move, in page 22, line 41, to leave out from the first "to" to the end of line 46 and to insert:


(i) the assets comprised in the acquisition or disposal and the consideration for the acquisition or disposal; and
(ii) the date and manner of the acquisition OT disposal. including any condition to which it was subject and the satisfaction or otherwise of any such condition.

Mr. Deputy-Speaker: With this Amendment can be discussed that in the name of the hon. Member for Crosby (Mr. Graham Page), in page 22, line 49, at end insert:
Provided that Where the person on whom such notice is served is a solicitor who is acting or has acted for the person who may be chargeable to tax in respect of any transaction about which information is sought in the notice, he shall not, without the consent of his client, be required to give any further information beyond that referred to in subparagraph (a) of this Clause and the statement whether or not he has acted for his client in connection with the matters specified in the notice.

The Attorney-General: During the Committee stage we had a very full discussion of Clause 15 (5) on an Amendment moved by my right hon. Friend the Member for Flint, West (Mr. Birch). I do not wish—and I do not think the House would wish me to do so at this late hour—to cover all the ground that we covered in that debate.
I would, however, like to remind the House quite shortly that it is in the opinion of the Government essential, if Case VII is to operate, that the Revenue should have powers to obtain information of the character indicated in order to prevent tax evasion. My right hon. and learned Friend the Chancellor in his Budget statement said—I reminded the Committee of it, and I would remind the House of it tonight—that in assessing liability to a Case VII charge the Revenue will rely primarily upon the ordinary Income Tax return, which will


include a section for the return of chargeable matters under Case VII. It is important to bear that in mind.
The existence of a power by the Inland Revenue to check a return by seeking information from the agent of the taxpayer is likely to encourage the taxpayer to send in correct returns. The knowledge that his returns may be checked is likely to deter him from sending in incomplete ones. So Clause 15 (5) will have a deterrent effect. That, I believe, is its main value. I doubt whether in fact it will be necessary in practice to make much use of the power it gives to the Revenue; the important fact will be that those powers are there; and I hope the House will agree that it is essential that the Revenue should have some such powers.
Bearing in mind that for the purposes of Case VII what has to be found out is the date of acquisition, the price paid, what has been acquired, the date of disposal, and what has been disposed of, and for what price, it is obvious that the persons from whom to obtain information about these matters are those who have acted on behalf of the taxpayer, who have acted as his agents in carrying out such transactions. Under Clause 15 the Commissioners can only require information from the taxpayer's agent if it appears to them that the person is or may be chargeable to tax. That is the first condition which has to be satisfied. Under this Clause the Revenue cannot call for a return of transactions effected by an agent which can come within Case VII; they must have grounds for believing there is or may be a Case VII liability on the part of the particular taxpayer before they can make any inquiry, and their inquiry must be related to a named individual.
The first thing to find out is whether the person has acted as his agent in connection with acquisition or disposal, and that is provided for, as the House will see, by subsection (5, a). If he has so acted, then he may be asked for further information, and I will come to the question of what further information he can be asked for in a moment.
The point I want to make now is that for the purpose of checking a named taxpayer's returns it is just not enough

to find out someone has acted for him in connection with an acquisition or disposal and no more. I would like to stress that point in view of the Amendment tabled by my hon. Friend the Member for Crosby (Mr. Graham Page) which we are going to discuss with this Amendment.
Having said that in relation to that Amendment, I now come to the question of what information the Inland Revenue should be able to ask for. In the Bill it is defined as information relevant to the question whether the taxpayer is chargeable and information relevant to the computation of the tax liabilities, of the gain or loss.
I said during Committee that I felt that some of the fears expressed about this provision were due to the use of the word "relevant". There is always room for argument about what is or is not relevant, and I undertook to see if it was possible to define more precisely what the Revenue could ask for. It is as a result of that consideration that this Amendment is moved. It is only fair that I state that there is no difference in what the Revenue have wanted and want power to obtain. The difference is in the wording of the Clause, and I commend it to the House because of its greater precision.
Under it, the House will see, information can be asked for under two heads, and I will deal with them in turn. First, there is information as to
the assets comprised in the acquisition or disposal and the consideration for the acquisition or disposal.
If we are to check the liability to charge under Case VII, we must be able to find out what has been bought and what has been sold, and the prices. Under the second head, the Revenue will be able to find out
the date and manner of the acquisition or disposal, including any condition to which it was subject and the satisfaction or otherwise of any such condition.
Clearly, we must get the date of acquisition or disposal, for chargeability will depend on that. The Revenue will also want to know the manner of acquisition or disposal. Was it, for instance, in the case of land, by the acquisition or disposal of a freehold or a leasehold interest? It is also important to find out whether the acquisition or disposal was in pursuance of a condition of contract


and, if so, whether the condition was fulfilled, for that will affect chargeability to tax.
I hope that the House thinks that the Amendment is an improvement on what was originally in the Bill. It underlines the fact that the information required is simply of a factual character, and, further, it has the advantage that those from whom information is sought will not have to concern themselves with its relevancy but whether it comes under one or other of the specific heads set out in the Amendment. I do not for one moment believe that the Revenue would seek information to which under this part of the Amendment it was not entitled, but should it do so. then it will be open to the recipient of the request to refuse to give it without getting into any controversy about relevancy.
If there is to be any check on the taxpayer's return where it appears to the Revenue that there may be chargeability under Case VII, this, I submit to the House, is information which the Revenue must have power to obtain from agents who act on behalf of named taxpayers in the acquisition or disposal of assets. I desire to stress this and also to stress that there is no power to ask a bank as to what passed between the bank and its customer, no power to see a customer's bank account, no breach of the confidentiality of communications between the bank and the customer, but only power to find out what the bank has done in this field as an agent of the named customer. It is very important that we all recognise that that confidentiality of communications between bank and customer should be preserved. All that is sought is just the information, and no more than that is necessary, to check the chargeability under Case VII.
I turn to the position of solicitors, because fears have been expressed about it. Today The Timescarries a report headed "Move to defend solicitor's privileges". Solicitor's privilege is something quite new to me. It is, in fact, the client's privilege which protects communications between a solicitor and his client, not any privilege which attaches to a solicitor in any personal capacity. I think that it should be made clear that the concern which has been expressed by solicitors about this is not

concern on their own behalf but in relation to their clients' interests, and I think that that should be made clear at the very beginning of what I say on this issue.
Just as in the case of bankers and their customers, so in the case of solicitors and their clients, the Revenue are not concerned with, and cannot under the Clause as amended obtain, information as to confidential communications between solicitor and client. Communications made to and from a legal adviser for the purpose of obtaining legal advice and assistance with regard to litigation are protected, and the Revenue will not be entitled to get any information of that character, so that there is no question of any breach of that facet of legal professional privilege.
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Let us suppose that a solicitor has acted for a taxpayer in buying some land. There will be no question of asking what instructions his client gave him or what advice he gave his client. All that is required is the date of the contract of purchase, the amount paid, and the manner of acquisition, whether it was freehold or leasehold. No question of litigation will be involved and no question of privilege which ordinarily attaches where litigation is contemplated. Even where such privilege arises there is authority for saying that a solicitor cannot refuse to produce evidence unless the client was entitled himself to refuse to produce it in court.
I seek to emphasise what I said in Committee. There is, as I see it, no question here of seeking to secure information as to communications between client and solicitor. They remain privileged, and all that can be obtained is factual information as to what the solicitor has done as agent for his client in the acquisition or disposal of assets. This is somewhat analogous to the provision in Income Tax which has been in existence since 1842 in what is now Section 22 of the Income Tax Act, 1952. Under that provision every person, and that includes a solicitor, can be asked to make a return of any money or value or any income which he receives for which some other person may be chargeable to tax. He may be asked to make a return of what is received on behalf of all his clients, and when the


Royal Commission on Profits and Income was sitting I am informed that the Law Society made no representations with regard to Section 22.
I do not think it is possible to exempt one category or more than one category of agents from the scope of Clause 15(5). If then there is to be power to obtain information from an agent it must surely be from all kinds of agents, because if it were not so those exempted might expect an increase of business on chargeability to Case VII.
There is one further point with which I must deal in view of the article in The Timestoday. It is suggested that a solicitor might not be able to represent his client if the Inland Revenue prosecuted and if a solicitor was one of the main witnesses called by the prosecution. I do not feel very impressed by this contention, for the evidence required in such cases from a solicitor—and cases of criminal prosecution are very few—would be, as I have indicated, of a purely factual nature about which I think it most improbable that there would be any dispute. In fact there have been occasions in the past when solicitors for the defence have been called upon on subpoena to testify for the prosecution as to formal evidence and to produce documents. I do not think that there is very much in that point. However that may be, if the principle is accepted by the House, as I think it has been, that there must be power to check the taxpayer's return, I think it must follow that it must be a power to check with all agents. The Amendment defines more precisely what can be obtained, and for the reasons given I ask the House to accept it.
I conclude by saying that I think that a provision giving power to inquire, such as this, to the Inland Revenue should be properly subjected to close examination. I hope that what I have said will allay the fears of those members of the other branch of the legal profession who have felt, partly due to the use of the word "relevant" that the power given would be a power to inquire into matters relating to communications between a client and solicitor or solicitor and his client. I hope that I have made it absolutely clear that that is not wanted by the Revenue. It is not the intention that

the Clause should provide it. The intention—and the Amendment seeks to make that clear beyond shadow of doubt —is only to seek power to obtain factual information in relation to acquisitions or disposals done by an agent, including a solicitor, which may give rise to chargeability under Case VII.
I am sorry for taking up so much time on this, but I thought, in view of that article and the fears which I know have been expressed, it would be right, and the House would like me, to deal fairly fully—although, I hope, not too fully—with this Amendment.

Mr. Nigel Birch: I am grateful to the Attorney-General for moving this Amendment. It is, I think, an improvement on the wording in the original Bill. It is an improvement in that it clearly defines exactly what information can be asked for. I wish he could have gone further and adopted the suggestion I made before the High Court order, but these words are acceptable and I am grateful to my night hon. and learned Friend for going as far as he has gone.

Mr. Graham Page: With great respect to my right hon. and learned Friend the Attorney-General, think he has made perfectly clear what he wants, but I cannot read this Clause 15 (5) to have such a limited extent. Clause 15 (5) seems to oblige a solicitor upon demand from the Commissioners of Inland Revenue to disclose the affairs of his client.
It is all very well for my right hon. and learned Friend to say that it is not desired to demand disclosure of communications between the client and the solicitor and that all that is required is a matter of pure fact. There can be no division between advice and fact in the relationship between solicitor and client. The solicitor advises on facts. He advises on documents. They are part of the transaction between the solicitor and the client. I have no doubt that the administrative difficulties applying i n collecting the short-term gains tax are great —

Mr. Callaghan: Could the hon. Member help those of us who are trying to understand the solicitors' case on this matter? What does he mean when he says that there is no difference between


advice and fact? If I am asked as a solicitor, "Did you sell on behalf of your client such-and-such a share and on what date?" the answer is "Yes, on such-and-such a date". Surely there is a difference between saying that and saying, Did you advise your client to sell this share?". What does the hon. Member mean by saying that there is no difference between advice and fact?

Mr. Page: If the hon. Member will allow me to develop the argument in my own way, I think I shall come to that point and I may be able to satisfy him. I cannot believe that this tax is so unlike any other form of taxation that it is necessary to have a special Clause of this sort in the Finance Bill which would set aside the constitutional right of the subject. My right hon. and learned Friend said quite rightly that this is not solicitor's privilege and has nothing to do with solicitor's privilege. It is the right of the subject, a right which I put as a constitutional right, to the privacy of legal services, not just the privacy of legal advice but the privacy of affairs between solicitor and client. I do not think that I am putting it on too high a plane.
It is of supreme importance to the proper administration of justice that the citizen should have the right to make what statements he likes to his solicitor, to seek what advice he chooses and that it should be confidential and should remain confidential. This has been recognised for a long time. I shall read a few sentences from Taylor on Evidence, an accepted text-book on this subject. It says:
the rule is now well settled that, where a barrister or solicitor is professionally employed by a client, all communications which pass between them in the course and for the purpose of that employment are so far privileged that the legal adviser, when called as a witness, cannot be permitted to disclose them, whether they be in the form of title deeds, wills, documents, or other papers delivered, or statements made or of letters, entries or statements, written or made by him in that capacity.
It continues:
This rule equally applies, though the solicitor be employed in the characterߪof a conveyancer to draw deeds, or though the conversation relate only to the sale of estate…It extends to all communications between a solicitor and his client, relating to matters within the ordinary scope of the solicitor's duty".

That is well confirmed in Halsbury's Laws of England and in other textbooks.
First, I will clear up some fallacies which have arisen in connection with this matter.

Mr. Callaghan: I am not interrupting in any hostile manner. I think that it is important that we should try to understand the case which the hon. Gentleman is putting. Is he saying that the information 'which is now required is contrary to the definition he has read? If he says that, how does he square that with the returns which, apparently—I did not know this until today—a solicitor already makes under the Income Tax Act, 1952, to which the Attorney-General referred?

Mr. Page: If the hon. Gentleman will allow me, I shall come to that.

Mr. Callaghan: If the hon. Gentleman 'would answer now we should understand better as he goes on.

Mr. Page: The answer to the first part of the hon. Gentleman's question is that I do say that Clause 15 is a breach of the privilege of a client in his relationship with his solicitor. I say that it is a breach because it would require the production of documents, the production of facts, the production of communcations between solicitor and client which are at present protected from production.

The Attorney-General: My hon. Friend says "require the production of documents". I thought I had made clear that it does not require the production of any documents at all. All that is asked is that the solicitor shall state, "When did you buy this piece of land, and what price was paid for it?". No documents are asked for, and no information as to what advice he has given to his client or any communication which passed between him and his client is required.

Mr. Page: With great respect to my right hon. and learned Friend, he cannot ride off on that. In his own Amendment he requires the solicitor to state
the date and manner of the acquisition or disposal, including any condition to which it was subject.


Surely, that is the contents of the document. If my right hon. and learned Friend is now saying that the solicitor will not be required to produce the document, that does not carry any weight with me. He will be required to state what are the contents of the document in saying what was
the date and manner of the acquisition or disposal, including any condition to which it was subject.
I say that that is a serious breach of what has been recognised as a privilege of the citizen in his consultations with his solicitor.
My right hon. and learned Friend said, quite rightly, that is not the solicitor's privilege. It has been said in a case that the privilege is the privilege of the client, not of the professional adviser. He said also that, if allowed, it would not be restricted to a solicitor, and, if the communications of a solicitor are to have privilege, then it should apply to all agents. This is made quite clear in the law as it now stands. It is only the communications between solicitor and client which are protected in this way, and this protection has never been applied to the relationship between, say, a doctor and a patient or a priest and the person who consults him. For the purposes of the administration of justice this has been applied, and applied very strictly in the past.
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I want to make it clear that this privilege does not afford protection to any communications between a solicitor and client which are in preparation of a fraud or a crime. If there is something of that nature in the communications, the solicitor is obliged to disclose it. I will again quote a passage from Taylor on Evidence, because I think it expresses the position very well, to show that the Treasury has sufficient powers under the existing law to get all the information it requires without the new Clause, Which is a breach of the privilege. Taylor on Evidence says:
But the legal adviser can be asked whether the conference between him and his client was for a lawful or an unlawful purpose. If, either from his admission or from independent evidence, it should clearly appear that the communication was made by the client for a fraudulent or criminal purpose…the privilege does not exist, and he is bound to disclose the guilty project.

He is also bound to disclose the name of his client. The Treasury has sufficient powers already without altering the law, which is what the Amendment would do.
Great care has been exercised in the past to preserve this right of the citizen to privacy in his legal services. It was recognised in the Companies Act. It was recognised in the Borrowing (Control of Guarantees) Act. It was recognised in the Legal Aid and Advice Act. There are only three instances, one of which my right hon. and learned Friend mentioned, in which there has been any attempt to tamper with this privilege. The one which my right.hon. and learned Friend mentioned was Section 22 of the Income Tax Act, 1952, which imposes an obligation on solicitor's to supply information about taxable income passing through their minds. That is entirely different. Money is passing through the hands of the solicitor untaxed and he is required in the course of his business to disclose that to the Revenue.
The second instance is Section 414 of the Income Tax Act, 1952, under which the Special Commissioners can require information about transactions relating to the transfer of income of persons living abroad. In that case the Section has so many restrictions that it boils down to merely giving the name of the client.
The third example is the Trading with the Enemy Act, 1939, against which no one would complain. Any agent—not a solicitor, specifically—can be required to furnish the Custodian with information and documents. I think I can safely say that those are the only three occasions on which this privilege has been tampered with in any way.
There is here a conflict of public interest between the Revenue, on the one hand, and the proper administration of justice, on the other. The need for a few £s traced by this means is not worth the abandonment of what I believe is a constitutional principle. My hon. and learned Friend was quite right, although he scoffed at the example, when he indicated where it might lead. If a client has carried out some transactions on the advice of his solicitor, with the assistance of his solicitor, and if the documents have been drafted in the solicitor's office and the Revenue then thinks that he is chargeable to tax


and gives notice to the solicitor to provide the information, even though it be the information which is set out in the Amendment, the solicitor can be called as a witness to give that evidence and produce documents against the client for whom he has previously acted. It may occur that that client comes to the solicitor for defence in that case and finds that the solicitor is the chief witness for the prosecution. It is not impossible that under the Clause that could happen. It would be a choice theme for a plot for one of the court scene plays or films that frequently appear. Although the short-term capital gains tax will be difficult to enforce, it is not worth causing this breach of the rights of the citizen in connection with his legal consultations.

Mr. J. Grimond: Arising from what has been said and without prejudging the issue, I wonder whether the Attorney-General could answer just one question. I understand that the Clause as drafted gives the Commissioners of Inland Revenue the right to ask for certain information from solicitors and other agents. If I understood him aright, the Attorney-General said that this did not confer any right upon the Commissioners to demand the production of documents. If there is dispute, if the Commissioners are not satisfied with the information provided by solicitors or the client's agents, do I understand that they have no right to ask that the documents in question should be produced?
I quite understand that if there is any question of fraud it would vitiate privilege. If, however, there is a simple dispute, is it the intention that the Commissioners—

The Attorney-General: I can answer straight away. The Clause gives power to the Inland Revenue to ask the solicitor or agent specific questions—for example, to ask the solicitor what was acquired and the date of acquisition. If the solicitor writes stating, that, say, three fields were acquired at such and such a date and gives the location of them, that is all that can be done under this provision. The Inland Revenue cannot go further unless proceedings are started for fraud, when the service of subpoenas may come into the question.

Under this provision, however, it is a power to ask the agent to supply information. The power does not extend beyond that.

Mr. Grimond: I am obliged to the right hon. and learned Gentleman. In fact, the whole question of subpoena'ing a solicitor to produce documents does not arise under the Clause?

The Attorney-General: The Attorney-General indicated assent.

Mr. Eric Fletcher: I should like to say a few words in support of the Amendment put forward by the hon. Member for Crosby (Mr. Graham Page), because I rather detected from the interventions from the Front Bench that we have not entirely convinced all my hon. Friends about the merits of the Clause. I am encouraged to pursue the matter because I share the view of the hon. Member that a question of considerable constitutional importance is involved in the Amendment.
As the hon. Member said, we are faced with two conflicting public duties. One is the necessity of giving the Inland Revenue all reasonable power to prevent the avoidance of tax that is properly payable and the other is to maintain the important and cherished liberty of the subject freely to be able to communicate and discuss his affairs with his legal advisers without the risk of those confidential communications being disclosed.
I share the view, which is held, I am sure, on this side of the House, that it is the duty of everybody to do all he can to prevent any evasion of revenue laws. At the same time, we have to remember that for centuries the administration of justice has depended upon the fact that citizens are entitled to get legal advice upon all their affairs in the sure and safe knowledge that they can disclose matters in confidence to their legal adviser without the risk of their legal adviser, without their consent, having to disclose any information to third parties. If that were not so, the administration of justice could not continue and the liberties of the subject would be seriously affected.
It is part of the law of the country that nobody is guilty of an offence until his guilt has been proved. He is deemed to be innocent. In this law, as in other


realms of the law, there will be a number of borderline cases in which disputes will arise as to whether an offence has been or has not been committed.
This Clause, like sections of all Revenue Acts and a great many other Acts, will call for a good deal of careful investigation and examination, and people will be entitled to take advice as to what is lawful and what is not. The law in respect of the Revenue is no different from other aspects of the law. It is a serious matter to evade any revenue duty, but there are other crimes equally serious.
Murder is a serious crime. People on a charge of murder are entitled to have their defence put forward. They are entitled to legal advice. They are not to be convicted until they are proved guilty. There are numerous other offences. There is the Official Secrets Act, to which the Attorney-General is so devoted. Cases arise under that.
We could get this country into a sorry state if its citizens accused of offences, when in a position in which they thought they might be involved in disputes with the authorities, whether the police or the Revenue, were not able, in conditions of absolute confidence, to seek legal advice and to seek it without fear of disclosure to third parties.

Mr. Anthony Crosland: My hon. Friend speaks of legal advice and suggests that it is under threat from this Clause. The Attorney-General has said that under no circumstances could advice be covered by this provision but simply factual statements. What is the relevance of what my hon. Friend is saying?

Mr. Fletcher: I am sorry that my hon. Friend does not appreciate the relevance.

Mr. Callaghan: We are doing our best.

Mr. Fletcher: I am sure that anybody who has had any experience of practice in the legal profession, whether as solicitor or as a member of the Bar, must know perfectly well that it is quite impossible to draw a hard and fast line between what is fact and what is advice.

The Attorney-General: I am not asking for anything which passes between solicitor and client. I am asking for facts as to transactions with third parties

conducted by the solicitor as agent for his client. It is the facts of the transactions with third parties that are required. I repeat again what I have said before. This Clause does not give power, and no power is sought, to inquire as to anything that passes between solicitor and client.

Mr. Fletcher: I know that the right hon. and learned Gentleman has said that, but in view of the answer he gave to the right hon. Member for Orkney and Shetland (Mr. Grimond), there is still a good deal of ambiguity. One of the right hon. and learned Gentleman's supporters said, when we discussed this in Committee, that he does not accept any assurances made in this House as to how any particular Statute will be interpreted.
What is far more relevant is that the Council of the Law Society, which is a responsible body consisting in large part of supporters of the present Government, feels acute and deep concern about this Clause, even though it has been amended in the way described by the right hon. and learned Gentleman. The members feel that concern not for their own protection but because, from their years of experience, they know that situations arise almost daily in which members of the legal profession are consulted about all kinds of matters, not on one specific transaction, but over a whole range of details of a person's affairs. That has been done deliberately, and people have been entitled to do it because of the absolute privilege which exists when they seek legal advice.
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Once there is any inroad into that privilege of the citizen to discuss matters freely with his legal advisers and give them information of facts on which advice may be tendered, there is a fear in the minds of the Council of the Law Society that solicitors will not be able to continue to practise their profession with the same freedom as they have done in the past, and there is also a fear that this inroad into the privilege of the citizen will lead to making it much more difficult for the administration of justice to be carried on, because be it observed that solicitors are not agents for the Revenue or for the police.
I have no doubt that if we lived under a complete dictatorship lawyers could


be made agents of the Revenue and the police. If we want that sort of society, we can have it. Some States have it. It is the type of society in which no citizen has any freedom at all, and no right to take legal advice, and in which there is a presumption of guilt rather than of innocence. We can have that kind of society, in which lawyers are made the agents of the Government with a duty to make disclosures about their clients' affairs to the Revenue, to the police, or to anybody else, but that is not the kind of society in which we have been living for the last two or three hundred years, and it is not the kind of society which corresponds with my concept of a free society.
I appreciate this conflict, but where there is this conflict it is of paramount importance to protect the liberty of the subject. I believe that all these powers which the Revenue want to enforce under this part of the Bill can be obtained—as, indeed, I think the Attorney-General recognized—largely by the powers which exist to require information from the taxpayer himself or from other agents.
I think that where there is this conflict the House would be making a serious mistake if it made what is widely regarded as a serious inroad into this protection of the citizen against the risk of confidential information communicated to a legal adviser being repeated without his consent to a third party.

Mr. Forbes Hendry: It is with great regret that I rise to criticise the opinion of my right hon. and learned Friend the Attorney-General. There is a great deal of concern among the legal profession in Scotland about the proposed Amendment, and I have been asked to support the Amendment in the name of my hon. Friend the Member for Crosby (Mr. Graham Page).
The effect of the Government Amendment is not what my right hon. and learned Friend says it is. What a solicitor is being called on to do is to give details of any acquisition or any disposal. The Clause as originally drafted mentioned the word "relevance", but this word has disappeared, and a solicitor is now being called on to give information about any acquisition or any disposal. He is being called on to give not only the date but the

manner of the acquisition or disposal, including any condition to which it was subject and the satisfaction or otherwise of any such condition.
In other words, private and secret information between a solicitor and his client has to be disclosed to the Revenue, whether it has any relevance or not.
The law in Scotland on this subject is different from that in England, and goes back a long way. It was re-stated as far back as 1681 by Lord Stair in his "Institutions of the Law of Scotland". This is what Lord Stair states:
Advocates, agents, factors, trustees are suspect witnesses for those who intrust them. But they are not obliged to depone to any secret committed to them.
That has nothing whatever to do with legal advice but the secret communications between a lawyer and his client.
It is established law in Scotland that this is a privilege not of the solicitor or the advocate, but the privilege of the client which the legal adviser is not at liberty to disclose to anyone without the consent of the client. The whole principle was strongly stated in Dickson's work on evidence, which is still the standard work on evidence in Scotland. Dickson described it as follows:
By a sacred and settled rule of law, communications between a party and his legal adviser regarding the subject of a suit depending or threatened arc secure from disclosure.
That is a sacred and settled principle of the law of Scotland. The Act of Union preserved that principle of the law of Scotland for all time.
The present situation seems to be a question of whether the right of the citizen to commune with his legal adviser is to be weighed in the balance with the temporary advantage of a few £s for the Revenue. In the past it has been held essential in the interests of justice and good administration that there should be secrecy between a citizen and his legal adviser. Without that privilege it would be impossible for anyone to go to a legal adviser knowing that whatever he told him would not be given away. It is absolutely vital to the administration of justice that this privilege be continued.
I beg my right hon. and learned Friend to change his mind on this issue and to accept the Amendment proposed by my hon. Friends.

Sir B. Janner: Some hon. Members who have spoken are solicitors. I should like to begin by answering the question that has been asked as to who is backing the kind of opinion my hon. Friends and I are putting forward. There is nothing secret about the answer. It is the Law Society. This organisation does not exist for the purpose of protecting solicitors in fraudulent or similar transactions. On the contrary, the Law Society sees to it that the public interests are protected.
If the Law Society, in its wisdom, having considered all the circumstances, has come to the conclusions we are trying to put forward tonight, it indicates not that the Law Society wants any advantage for the legal profession but that it wants the public to be protected in the way they have hitherto been protected when consulting legal advisers. I would make that clear here and now.
There is not an hon. Member present who, when he goes to his solicitor, does not expect him to keep every single piece of information secret and not to disclose it even to the nearest person connected with the hon. Member. Do not let us have any misunderstanding about this. The question arising now is whether any hon. Member would be prepared to say that what he has hitherto regarded as the relationship which existed between him and his solicitor should be in any way altered.
I ask the House to consider this from that point of view. That prevails not only with every Member of the House but with every person who crosses the threshhold of a solicitor's office as a client, not matter how small or how large his case may be. It may interest the House to know that one of the first things a solicitor does when he trains an articled clerk is to tell him that in no circumstances must he disclose anything which comes to his knowledge within the office to any other person, no matter how close that person may be to him.
Having that in mind, I think the Attorney-General has to consider how far he is prepared to crash into that principle. There is ample evidence, as the right hon. and learned Gentleman knows as well as anyone in the House, of learned judges who have expressed

themselves in no uncertain terms about this. I could quote numerous references, but I do not intend to keep the House for any length of time. It is known to everybody. It is sheer nonsense for anyone to suggest that he does not realise that this constitutional principle has been established to such an extent that none of us would desire to have it interfered with in any way.
It is no particular gift to the legal profession. On the contrary, it makes the legal profession watch its p's and q's very closely on every occasion, even, for example, in the matter of disclosing a client's address. So in dealing with these Amendments I would like the House to realise that all the quips that come across the House are not really becoming on an issue of this kind. On the contrary, we are dealing with something which goes to the heart of the right of the individual as against an oppressive or potentially oppressive State or police force.
Those of us who have had a fair amount of practice know very well that often a client comes in and puts his cards completely on the table. It is within the knowledge of every hon. Member that judges very frequently tell a person who attempts to plead guilty that perhaps he had better consider his position and plead "not guilty" as it may be proved that he is not guilty. What all that implies must be clear to intelligent hon. Members who can think for themselves or have had occasion to consult lawyers.
What is being attempted here? Have we tested yet whether there is a need for any breach of this principle? Why should we anticipate that there will be need to break down this rule, which is a very essential rule from the point of view of protecting not the solicitor but the 'public? It is nonsense to say that because one is going to be asked to give particulars of the assets comprised in an acquisition, that will be the end of the matter. How can it be? If an action is taken, someone will be called to prove the case. Who will be called? It will probably be the solicitor who has given the information which has been requested of him. He will be under examination. Who can stop it? The judge will not be able to prevent him against


producing documents because it naturally flows from the information which he has to give that the documents would have to be produced particularly if anyone were attempting to deny particulars contained in them. The prosecution would call on the solicitor. How could that solicitor possibly appear for the person who is charged? It is unreasonable to expect this, and the Attorney-General knows it very well.

The Attorney-General: The hon. Member must not say that. It has happened on more than one occasion, as I said, that the solicitor acting for the defence has given evidence of a formal character, of a factual nature, for the prosecution.

12.45 a.m.

Sir B. Janner: The Attorney-General, with his vast experience, knows very well that it is not a purely formal matter we are talking about. If there were any case, any action, against the client, it would not be a formal matter. With the greatest respect, I ask the Attorney-Genera, to think not of the days when he is the Attorney-General but of the days when he was himself practising in the courts and when he realised that his jab was to see to it that the person whom he was acting for was protected by himself as his adviser until he was found guilty. A lot of Members in this House are apt from time to time to make cynical remarks about the legal profession; they are wrong about it, because an enormous responsibility rests on a lawyer who is conducting a case on behalf of his client, and who is given information because the client knows very well that at no time will he disclose it to anyone else without consent. It is perfectly true, of course, that if there is any fraudulent intent, or if any fraudulent matter arises, that is an entirely different thing.
It may be that the solicitor has not participated in the transaction but gets knowledge of it because his client has told him what has happened, and may ask advice.

Mr. Millan: If that were the case, that would not be covered by the subsection because that would not fall under paragraph (a). It would not cover it.

Sir B. Janner: I do not agree it would not be covered by it. It would not require a considerable amount of ingenuity to bring that in. Assuming that a client had come in to seek advice about a contract, I think circumstances could arise in which the section could operate far beyond what has been indicated here.
The fact that the Attorney-General says in this House that it is not intended to mean something or another would not be admissible in a court, and everybody in this House knows that very well. We cannot bring HANSARD into court and show that the Attorney-General in his wisdom said on such and such a date that the subsection meant so and so. It is for the court to decide what it means.
I say respectfully to the Attorney-General, do not impose or put into a Bill something which will strike a blow at what he respects as well as 1 do, and that is the constitutional right of an individual to be protected by his solicitor, and to have protection from disclosing information or documents brought to the solicitor in his professional capacity. It may, of course, be just possible that, in a case or two, a difficulty will arise, but it is not worth driving a coach and four through a principle in order to obtain information from one or two pepole in cases.
I suggest to the Attorney-General that his best course is to accept the second of the Amendments, and if at the end of a year he finds it does not work, then to come again to the House to ask for the Amendment he wants. I am of the opinion that the Amendment would cover all the information which is necessary. The Attorney-General should retain the aspect of confidentiality which it is worth while keeping. He should accept the Amendment and, if it does not work, come back to the House next year and say so. That is better than inserting his Clause and, as it were, assuming the guilt of all those who come within its provisions. He should accept the Amendment. If it does not work and he returns to us next year, the House will give him what he wants.

Mr. Leo Abse: It is not because the Law Society has expressed disquiet about the present position that


I rise to speak but because I feel disquiet about it. I realise that hon. Members who are not solicitors may regard this, as apparently some do, as a lawyers' lobby seeking some special rights, but that is clearly not the position, for if there is one lesson which any experienced solicitor has learned it is that his duty is to protect the individual from encroachment made by State agencies.
When one realises the importance of this principle, one is surprised that this sledge hammer is being taken to what is obviously a marginal matter. It is perhaps characteristic of a society which is so preoccupied with the making of money that it wishes to erode this long-established constitutional principle on a question of revenue, whereas if the same principle were applied we should have the police in a position to write for a descriptive account, serving a notice on a solicitor asking the date when an alleged murder took place or the time at which an act of the client took place. If the Revenue may demand a descriptive account, what is to prevent the National Assistance Board from demanding from a solicitor the address, purely descriptively, of an errant husband for whom the Board is looking in connection with maintenance proceedings? If a man has had an accident, what is to prevent the Ministry of National Insurance—

Mr. Speaker: Order. The hon. Member must direct his observations to the matter which we are discussing.

Mr. Abse: I am pointing out that an encroachment is being made by the Inland Revenue upon a long-established principle and that this is opening the door for every other State agency to do likewise. It is no use the Attorney-General saying, "I am asking only a simple matter—when did the contract take place?" That could be a very complicated matter. Every solicitor knows that there are innumerable disputes to decide when property actually passed. One person may say one day and another person may say another day. A solicitor would be compelled to give a great deal of information in answering that question.
I point out to my hon. Friend the Member for Cardiff, South-East (Mr.

Callaghan) that those who are used to this sort of procedure know full well the problem of being able to distinguish between facts and advice. Does the Attorney-General seriously suggest that in all transactions the solicitor could simply give the date when the property passed? He said that all that is being asked is certain conditions, but these may have to be spelled out from prolonged correspondence going back over a number of years.
In order to provide information to the Inland Revenue a whole series of letters may have to be submitted. Would those letters be entirely free advice or speculation? Would they be confined to specific conditions within a contract? We realise that this cannot be brushed aside in the way the Attorney-General has brushed it aside by saying that all that is required is a simple form answering "Yes" or "No" and supplying a date. These will be complicated matters and all the evidence that might come into them might have to be presented to the Inland Revenue. I would resent that I should have to become an agent of the police or of a Ministry or the Inland Revenue. Many of us who are jealous of our great tradition of the liberty of the subject are by no means appeased by the Attorney-General's suggestion that this requires only a simple form.
Assuming that it was a complicated transaction involving speculation as to the date when the contract was made, would not a solicitor who had to appear in court be subject to cross-examination on these matters? Is it not inevitable that he would have to say what his client said to him on such-and-such a date, to spell out the conditions and the time of the contract? It is abundantly clear that not enough thought has been given to this Amendment. It is inescapable that more information would have to be given to the court than the Attorney-General has suggested.
We oppose this because we are jealous of the liberties of the subject and we are concerned that no State body should be able to start using a profession as spies or agents of the Civil Service. I urge the right hon. and learned Gentleman to give another thought to this matter. It is well known that the law as it stands is sufficient to give protection against fraud and that solicitors


have too much regard for themselves and are under sufficient discipline within the profession not to lend themselves to this type of thing.
What the Attorney-General's proposal is likely to bring about is that people will go to where they think the provision can be evaded. If a man has any doubt about the secrecy of a transaction he is likely to go to a solicitor in a part of the country remote from the solicitor whom he usually engages because he thinks that that will mean evasion. What will be done by this provision will be not to deal successfully with the evader but to embarrass the whole solicitor-client relationship.
We plead that an important constitutional right should never be eroded even if it is a matter of administrative convenience. It is always because it is administratively convenient that principle is eroded. It is eroded because it does not fit in with some bureaucratic Civil Service mind. Everything that we in the profession have done in the past that we regard as important has been done because we have been able to stand up for democratic rights. When we are faced with a society in which the bureaucratic attitude proliferates more and more it is essential that we take a stand. Unless we do so all our liberties seep away. This is an important one because it is one which protects ordinary citizens from serious encroachments by the worst forms of State bureaucracy.

1.0 a.m.

The Attorney-General: It might be for the convenience of the House if I reply to the arguments advanced by my hon. Friend the Member for Crosby (Mr. Graham Page) and others who have spoken on this matter. I listened with interest to their speeches, although I am afraid I could not agree with them for a number of reasons.
My hon. Friend the Member for Crosby outlined perfectly accurately the legal professional privilege which attaches when there is litigation or when litigation is contemplated. He read a passage from Halsbury which deals with that situation. He referred twice to the fact that that kind of privilege is necessary when there is litigation contemplated or threatened for the proper administration of justice. I do not quarrel with

him at all about that. That is clearly the case, and I say to him that if he will study this Clause carefully he will find—and I am sure be able to satisfy himself—that it in no way invades that legal professional privilege.
Secondly, he asserted that it meant a serious breach—

Mr. Fletcher: Mr. Fletcher rose—

The Attorney-General: I will deal with the speech of the hon. Member for Islington, East (Mr. Fletcher) later. I am dealing first with my hon. Friend.

Mr. Fletcher: I hope the Attorney-General will forgive me, but I think he has said something which is inaccurate. He said that this privilege applied only in case of litigation.

The Attorney-General: I did not say that. Those were not my words. If the hon. Member would be courteous enough to allow me to go on I shall come to his speech. I said that my hon. Friend had outlined perfectly accurately the privilege which attaches when litigation is contemplated and he said twice that it was necessary for the proper administration of justice. I went on to say, and the hon. Member for Islington, East may not have caught it, that in my submission to the House this provision in no way invades that privilege.
My hon Friend asserted that the power given by this Clause as we hope to amend it would enable the Inland Revenue to find out what he said were facts and advice in relation to what had happened between the solicitor and his client. I am not asking the House to accept any assurance from me, but I say that if he will consider the wording of this Clause and the Amendment he will not find any wording in the Amendment which would justify the request for any such information, and it has been deliberately worded in that way. If any such request were made, the solicitor to whom it was made would be perfectly entitled to refuse it. There is no question here of finding out what passes between solicitor and client. I hope, despite the observations of the hon. Members who have spoken to the contrary effect, that on reconsideration of the wording of this Clause they will see that there is not a peg on which that contention could hang in the wording. What can be asked for, and only asked for, is as to facts


relating to acts done by the solicitor as an agent in connection with the acquisition or disposition of assets, that is to say, acts done with third parties.
I cannot agree that it is wrong that a solicitor should be required to give information about that. I do not feel that that involves a serious breach of a constitutional right. The objective is to provide the information under the specific heads which are given here. In fact, solicitors have to produce conveyances, which give a great deal of this information, for the purposes of Stamp Duty. The trouble about dealing with transactions in relation to land is that the liability to a Case VII charge does not depend upon the date of the conveyance but upon the date of the contract. If it is such a serious breach of constitutional right to disclose the subject matter of a contract and the date of its execution, it is astonishing to me that, for so many years, this information has been later revealed without objection by production of the conveyance.
Mr. Graham Page: I have restrained myself from interrupting my right hon. and learned Friend, but he mentioned a few sentences back that this dealt only with information when the solicitor has been dealing with third parties. Could he, please, give an undertaking about what is meant by things like consideration? It may not be a money consideration. It may be family consideration. And what of the manner of acquisition, too? If the solicitor is acting for a family and the transaction is between members of the family, as indeed it may well be in these tax matters, may he not be forced to give information under this Clause as amended?

The Attorney-General: I find it a little difficult to visualise that one member of a family will seek to make a speculative gain out of another member of the family. [HoN. MEMBERS: "Oh."] I find it somewhat difficult to visualise. As I said, this is dealing with information simply for Case VII, the speculative gains tax. I stress that condition (a) has first to be satisfied, that the solicitor will be asked to state
whether he has acted on behalf of the first-mentioned person in connection with any acquisition or disposal of assets by that person.

That is a named person, and it is asking him to say, under (a), whether he has acted as agent. If he has acted as agent for the taxpayer in the disposal or acquisition of assets, he must have been acting as agent in the disposal to or acquisition from a third party. In all these cases, we are concerned with information as to transactions with third parties by a solicitor acting as agent. I think that that does appear quite clearly from the language, and it is not capable of any other interpretation.
The hon. Member for Islington, East spoke a great deal about legal advice and dwelt to some effect upon not taking any assurances from me. I am not asking the House to take any assurances from me. I ask the House to consider the wording of the Amendment, which is very different from and much more precise than that contained in the Bill as originally drafted. I suggest to the hon. Gentleman that, when he has applied his mind to this carefully, and reconsidered it in the light of what I have said, he will come to the conclusion that there is nothing in (a) and (b), as we propose to amend it, which entitles the Revenue to ask anything at all about legal advice. I can only say that that is my view. There is no intention to ask about legal advice. Whatever advice may or may not have been given is wholly irrelevant to the question of chargeability to Case VII tax.
My hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) drew attention to Scottish law and referred to the opinion that solicitors in Scotland have to keep secret any secret committed to them. Then he went on to say that that was when a suit was depending or threatened. If a solicitor buys some land on behalf of a client, there is no suit then depending or threatened. All we want to know, and all we are seeking to ask for, is details of a transaction so far as they relate to chargeability under Case VII.
The hon. Member for Leicester, North-West (Sir B. Janner) made a speech which dealt to some extent with questions of professional etiquette. He talked about how it is impressed upon the youngest solicitor not to discuss a client's affairs outside the office. I agree. The hon. Gentleman went on to talk


about legal professional privilege. I can only repeat what I have said before in the House. I would not support an invasion of the communications which pass between solicitor and client, whether they relate to facts or to advice. That is not what is being asked for. I can only give the assurance that we have most carefully considered the matter. The Amendment of my hon. Friend the Member for Crosby in page 22, line 49, would not enable the Revenue to have a cross-check on the taxpayer's returns. Our Amendment merely gives us what we ought to have to be able to get to cross-check and it does not enable the Revenue to ask for any more.
I want to deal with the question of what would happen should there subsequently be court proceedings. I repeat that this provision does not give the Revenue any power to call for the production of documents. It provides, like the provision relating to the return under Section 22, for the giving of information. Much has been said about professional privilege, but it is rather curious that when Section 22, to which I referred earlier, which had been on the Statute book since 1842, was under consideration by the Royal Commission, no representations were made to the Royal Commission by the Law Society to the effect that it was a breach of legal professional privilege.
As regards court proceedings, no reliance is placed on Clause 15 (5). The information that the solicitor sends in answer to specific questions will not be evidence against his client if his client is being prosecuted for a tax fraud. The documents that have come into existence, if there is a prosecution, may be producible on a subpoena duces tecurn.I repeat that I cannot believe that, if there was a prosecution, there would be any dispute as to the date of the contract or the acquisition or the amount of the price paid—the consideration.
I think that there was a case in 1954 where this very thing happened. The solicitor's evidence constituted a vital link in proving the case for the prosecution. The solicitor was called to give evidence on subpoena. That did not inhibit him from acting for the defence, because it was recognised that he was compelled to produce the document.
Dealing with production on subpoena, the solicitor cannot claim privilege himself and he can refuse to produce the document only if his client could refuse to produce it.

Sir B. Janner: Does not the learned Attorney-General realise that, before he calls for the production of a document, the information that he seeks from the solicitor would be necessary? It is on that information that he would call for the production of the document and institute the prosecution.

The Attorney-General: If the solicitor replied that he shad not acted for this named client in the acquisition or disposal of assets, or if he replied that he had acted but that he had no information to give about it—he might have no information; records sometimes get destroyed—that would be the end of the matter. If he gives the information, and in the unlikely event of a prosecution—prosecutions are very few—he could be called upon by subpoena to produce it. Indeed, a subpoena might be served upon him to produce all documents of this character without a return being made under this provision. It is necessary to make it possible to check the returns. I cannot see that any exemption for a particular category of agent is necessary.

1.15 a.m.

Mr. Fletcher: May I ask one question, which arises inferentially from the argument in today's The Times? It is there assumed, and it has been assumed for the purposes of this debate, that even without the Amendment the Clause would apply to solicitors. It is not so stated specifically; it has been assumed. The Attorney-General will realise that it could be argued that any such intention would be so contrary to precedent as to make it arguable. Can he give his opinion whether, without the Amendment, the Clause applies to solicitors?

The Attorney-General: I have no hesitation in saying that the Clause applies to all persons, whether solicitors or whatever other description attaches to them, who act on behalf of named taxpayers in connection with any acquisition or disposal of assets by that named taxpayer.

Mr. Callaghan: I hoped that the Attorney-General would end his remarks by appealing to the Committee to reach a conclusion on the Amendment. Apparently, there are still hon. Members who wish to speak on it, but I cannot believe that new arguments remain to be developed at this stage.
I rise for one reason. Everybody taking part in the debate so far has been a solicitor or barrister. As they have all been speaking with a view to protecting my interests as a citizen or client, it might not be a bad idea if one of the solicitors' clients was allowed to say a word. I have listened to both sides of the argument without much preconception about it, except this. On the whole, I am disinclined on principle to agree with the Attorney-General. I start on the natural assumption that he is wrong. To that extent, therefore, I was biased towards those who spoke in favour of the Amendment.
One thing that distresses me is that I find myself agreeing with the Attorney-General against my hon. and learned Friend the Member for Kettering (Mr. Mitchison), and this is most distressing for me. At least, it shows that there is a division of opinion between the lawyers in the House and the rest of us. On the whole, the rest of us are not disposed to make nearly as much of this as the lawyers are.
The hon. Member for Crosby (Mr. Graham Page) said something that, I thought, was absolutely true. There is clearly a conflict of interest and public duty. Having listened to the hon. Member's speech and to the speeches by my hon. Friends the Members for Leicester, North-West (Sir B. Janner) and for Pontypool (Mr. Abse), no one can say that they do not regard this duty as extremely important and serious and one that they want to take properly. Therefore, none of us should sneer at it or attempt to denigrate it.
I do not speak in that spirit, but I am bound to say that in view of the breaches in this principle—I use the words of those hon. Members—which have been made so fair without, apparently, impairing this delicate relationship between client and solicitor, I cannot believe that the production of these simple facts will endanger the whole fabric of our constitutional lives.
What is required is a simple piece of information. On the basis of what the Attorney-General said, I take it that it is open to a solicitor to refuse to go beyond the provision of information. If he does so, as I understand the right hon. and learned Gentleman, he cannot be required to produce anything beyond the information that is set out. [Interruption.] I know that my hon. Friend the Member for Leicester, North-West takes a different point of view, but I am speaking as his client. I am delighted that he seeks to preserve my interest so carefully, but I do not think I want it looked after quite as much as all that.
If I go to an accountant and ask him to sell some shares for me, he has to disclose it. If I go to a solicitor and ask him to sell shares for me, on the basis of the Amendment he will not have to disclose it. I am obliged to the solicitors for looking after me, but I see no reason why, if I ask a solicitor to sell shares, he should not have to disclose it any more than an accountant does.
I suppose that solicitors come much more closely into the question of land. I stress some of the points made by my hon. Friend the Member for Pontypool. On the other hand, as my hon. Friend the Member for Sowerby (Mr. Houghton) has reminded me, solicitors apparently already deliver to the valuation office particulars of contracts and sales. They have apparently, in all the tens of thousands that take place, encountered no violation to their consciences nor any betrayal of the interests of their clients in Riving, information to the valuation office about the amount for which the house was sold and the date of the contract.
We have spent 1½hours on what the lawyers undoubtedly believe is an important principle, but having listened with the best will in the world, and with the utmost desire to disagree with the Attorney-General, I find myself in agreement with him. If this matter is forced to a Division—I hope that it will not be—he and I will have to march through the Lobby side by side.

Mr. Dingle Foot: I profoundly disagree with my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), and I am much disquieted


by the speech of the Attorney-General. The right hon. and learned Gentleman referred to the privilege of the solicitor when litigation is contemplated, and said that these provisions in no way invaded that privilege. He knows perfectly well that the privilege of the legal profession goes far wider than when litigation is contemplated.
All sorts of people take legal advice about all kinds of matters from both sides of the profession when there is no question of litigation. There are all sorts of matters on which they need to be advised and to which privilege attaches. This subject goes far wider than the matters to which my hon. Friend the Member for Cardiff, South-East referred. Clause 15 (5) (b), even as amended, states that what is required of the solicitor or the agent concerned is that he shall
…furnish information in his possession…
That means any information in his possession. It means information which has come to him from clients. It is the essence of the legal profession, whether solicitors or members of the Bar, that, when clients consult them, everything those clients tell them is completely protected and wholly privileged. This principle is being invaded by the Clause.

The Attorney-General: Would the hon. and learned Member mind reading these words with those it is proposed to insert? He would then see that the information is information as to the matters specified in my right hon. and learned Friend's Amendment.

Mr. Foot: Certainly. And the information the lawyer has received on these matters is information he has received from his client, something which his client has told him but which he is

bound, under this Clause, to reveal. That is an invasion of privilege.

Mr. Millan: Does this not have to be read in conjunction with subsection (5) (a), and is not the definition contained in it the crux of the matter? Is this not a matter of interpretation?

Mr. Foot: There is no escape from the words of the Clause. The solicitor is firstly, under (a),
to state whether he has acted on behalf of the first-mentioned person in connection with any acquisition or disposal of assets by that person;
After he has made that statement, he has to go a step further and furnish any information in his possession. This is not just a question of furnishing dates or describing the assets. He has to furnish any information in his possession —and the important words are "any information"—which has been communicated to him by his client. I do not want to elaborate this at this late hour, but an extremely important principle is involved here, and I believe that the privilege not of the solicitor but of the client is of far more importance than the convenience of the Inland Revenue.

Amendment agreed to.

Amendment proposed:In page 22, line 49, at end insert:
Provided that where the person on whom such notice is served is a solicitor who is acting or has acted for the person who may be chargeable to tax in respect of any transaction about which information is sought in the notice, he shall not, without the consent of his client, be required to give any further information beyond that referred to in subparagraph (a) of this Clause and the statement whether or not he has acted for his client in connection with the matters specified in the notice.—[Mr. Graham Page.]

Question put,That those words be there inserted in the Bill:—

The House divided:Ayes 20, Noes 110.

Division No. 237.]
AYES
[1.26 a.m.


Abse, Leo
Howard, Hon. G. R. (St. lyes)
Talbot, John E.


Black, Sir Cyril
Kerans, Cdr. J. S.
Turton, Rt. Hon. R. H.


Diamond, John
Lubbock, Eric
van Straubemee, W. R.


Fletcher, Eric
Mallalieu, E. L. (Brigg)
Wilson, Geoffrey (Truro)


Foot, Dingle (Ipswich)
Mills, Stratton



Grimond, Bt. Hon. J.
Mitchison, G. R.
TELLERS FOR THE AYES:


Hendry, Forbes
Skeffington, Arthur
Sir Barnett Janner and


Hooson, H. E.
Stoddart-Scott, Col. Sir Malcolm
Mr. Graham Page.




NOES


Agnew, Sir Peter
Barber, Anthony
Berkeley, Humphry


Allason, James
Batsford, Brian
Bidgood, John c.


Atkina, Humphrey
Bennett, J. (Glasgow, Bridgeton)
Biffen, John




Bishop, F. P.
Harris, Reader (Heston)
Noble, Michael


Bourne-Arton, A.
Hastings, Stephen
Oakshott, Sir Hendrle


Bowden, Rt. Hn. H.W. (Leics, S.W.)
Hobson, Sir John
Osborn, John (Hallam)


Boyd-Carpenter, Rt. Hon. John
Hocking, Philip N.
Pearson, Frank (Clitheroe)


Boyle, Sir Edward
Holland, Philip
Pott, Perclvall


Brooke, Rt. Hon. Henry
Hornsby-Smith, Rt. Hon. Dame P.
Price, David (Eastleigh)


Brown, Alan (Tottenham)
Houghton, Douglas
Prior, J. M. L.


Callaghan, James
Howell, Denis (Small Heath)
Proudfoot, Wilfred


Chataway, Christopher
Hughes-Young, Michael
Pym, Francis


Chichester-Clark, R.
James, David
Redmayne, Rt. Hon. Martin


Clark, William (Nottingham, S.)
Jay, Rt. Hon. Douglas
Rees, Hugh


Cleaver, Leonard
Johnson Smith, Geoffrey
Ridley, Hon. Nicholas


Cliffe, Michael
Joseph, Sir Keith
Roots, William


Cooke, Robert
Kirk, Peter
Shaw, M.


Cordeaux, Lt.-Col. J. K.
Lawson, George
Skeet, T. H. H.


Cordle, John
Legge-Bourke, Sir Harry
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Costain, A. P.
Lilley, F. J. P.
Smithers, Peter


Critchley, Julian
Litchfleld, Capt. John
Stewart, Michael (Fulham)


d'Avigdor-Goldsmid, Sir Henry
Lloyd, Rt. Hon. Selwyn (Wirral)
Taylor,Frank (M en st r, Moss sade)


Donaldson, Cmdr. C. E. M.
Longden, Gilbert
Temple, John M.


Drayson, G. B.
Loveys, Walter H.
Tompson, Richard (Croydon, S.)


Eden, John
McLaren, Martin
Touche Rt. Hon Sir Cordon


Elliot, Capt. Walter (Carshalton)
Macieod, Rt. Hn. lain (Enfield, w.)
Walker, Peter


Emery, Peter
Macpherson, Niall (Dumfries)
Wall Patrirk


Farr, John
Maddan, Martin
Wells, John (Maidstone)


Finlay, Graeme
Maltland, Sir John
Whitelaw, William


Fisher, Nigel
Manningham-Buller, Rt. Hon. Sir R.
Williams, Dudley (Exeter)


Fraser, Ian (Plymouth, Sutton)
Matthews, Gordon (Meriden)
Wise, A. R.


Galpern, Sir Myer
Mawby, Ray
Wolrlge-Gordon, Patrick


Gibson-Watt, David
Maxwell-Hyslop, R. J.
Wood, Rt. Hon. Richard


Gilmour, Sir John
Maydon, Lt.-Cmdr. S. L. C.
Woodnutt, Mark


Glover, Sir Douglas
Millan, Bruce
TELLERS FOR THE NOES:


Goodhart, Philip
Miscampbell, Norman
Mr. J. E. B. Hill and


Gower, Raymond
More, Jasper (Ludlow)
Mr. Gordon Campbell.


Hamilton, Michael (Wellingborough)
Neave, Alrey

1.30 a.m.

Sir Henry d'Avigdor-Goldsmid: I beg to move, in page 22, line 49, at the end to insert:
Provided that the Commissioners of Inland Revenue shall supply to the first named person a copy of the notice at the time it is served.
This Amendment should not engender the same intense feelings as the last one. It refers to the notice to be served when the Commissioners have reason to suppose that there has been evasion. The effect is that when such notice is served by the Commissioners on the agent, at the same time the person into whose affairs inquiry is being made shall also be informed.
I understand from my few years of service in the House that it is not possible for back benchers to draft any form of words, however intelligible, which is acceptable to the Government draftsmen. But I believe that the Amendment contains a principle which the Government are prepared to accept. In moving the Amendment very briefly, I hope that even if these words are not acceptable, effect will be given to the principle in a subsequent Bill.

The Attorney-General: My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) has moved the Amendment with commendable

brevity. He has suggested that it is impossible for a layman to meet the drafting requirements. I would point out that the difficulty of the wording in this case is the requirement that a copy of the notice is to be supplied to the first-named person at the time it is served. That seems to demand a contemporaneous act which it would be difficult to achieve. Therefore, I am afraid that the wording cannot be accepted. It is unusual to accept an obligation to give a notice of this kind. There are many provisions in the Income Tax Acts enabling the Revenue to obtain information, but there is not a single precedent for a requirement of this kind on the Statute Book.
Having said that, and being of the view that in many cases it would be undesirable for the power to require information to be accompanied by any requirement to notify the suspected erring taxpayer, on this occasion I can say with the authority of the Board of Inland Revenue, which is controlling the inquiry for information, that it will undertake that when it makes inquiries of solicitors and banks it will notify without delay the taxpayer concerned. Without any undertaking of that sort, the banks and the soliciors would, one would expect, themselves notify their


customers. But the Board of Inland Revenue is prepared to undertake to do that.
I think that that in substance meets the suggestion contained in my hon. Friend's Amendment. I do not think that it would be right or proper to create in the Statute Book a precedent of this kind which might be embarrassing on future occasions, but what I have said will be done, and that is what my hon. Friend wants done. Therefore, I hope that he will be able to withdraw the Amendment.

Sir H. d'Avigdor-Goldsmid: Might I take i: that that when my right hon. and learned Friend refers to bankers and solicitors he includes the other agents such as accountants and estate agents and other individuals who may be questioned in this connection?

The Attorney-General: Yes. Perhaps I ought to have mentioned them specifically. Dealing with the matter at this late hour, and particularly after the last Amendment, I had especially in mind the position of bankers. It will be notice to all the agents from whom information is sought.

Sir H. d'Avigdor-Goldsmid: It is satisfactory to learn that a feat which seemed impossible less than five minutes ago is now capable of achievement. In view of that, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 17.—(MODIFICATION OF RIGHT TO SET CAPITAL ALLOWANCES AGAINST GENERAL INCOME.)

The Chief Secretary to the Treasury and Paymaster-General (Mr. Henry Brooke): I beg to move, in page 25, line 17, to leave out from "and" to the end of line 20 and to insert:
shall not apply to a claim for the year 1962–63 or for the year 1963–64, if the claim is expressed to be made on the basis that this section shall not apply; but

(a) subject to paragraph (b) below, a claim made by a person for any of those years on either basis (including a claim for the year 1961–62 made before the passing of this Act) may be superseded by a further claim made by him on the other basis within the time allowed for claims for the year 1963–64; and

(b) a claim may not be made for the year 1961–62 or for the year 1962–63 on the basis that this section shall apply, if a claim (not since superseded) has been made in respect of the same trade for a later year on the basis that this section shall not apply, nor may a claim be made for the year 1962–63 or for the year 1963–64 on the basis that this section shall not apply, if a claim (not since superseded) has been made in respect of the same trade for a previous year on the basis that this section shall apply.

(7) Where under paragraph (a) of subsection (6) above a claim made on one basis is, after effect has been given to it, superseded by a further claim made on the other basis, then (without prejudice to any other provision for adjusting tax) there may be made all such repayments of tax and assessments or alterations of assessments as may be necessary to give effect to the further claim in place of the claim superseded".
I may mention that there is a consequential Amendment to page 73, line 24.
I am glad to assure the House that this Amendment is not as formidable as it looks. Clause 17 is a complex one, but this Amendment deals with a quite narrow point in it and, I think, a noncontroversial one. The Clause as a whole deals with a new system for taking capital allowances into account from 1962–63 onwards and subsection (6) gives the taxpayer the option to decide whether to go over to the new system in respect of his claim for a loss in 1961–62. The whole object of the new system in Clause 17 is to be fairer to the taxpayer than the existing law on the subject, but in some cases the change over from the old system to the new under the Clause as it stands may do harm rather than good to the taxpayer. A compulsory change to the new basis in 1962–63 might, in fact, diminish his loss relief.
The purpose of the Amendment is to mitigate that by extending the option. The Amendment will enable the taxpayer to choose whether to start on the new method for 1961–62 or 1962–63 or 1963–64. In 1964–65, and onwards the new method will be compulsory, whereas under the Clause as it stands in 1962–63 the new system would be compulsory.
The Amendment further provides that if a taxpayer chooses the new method for one of those three years which I have mentioned he cannot then switch back to the old method for a later year. That is to say, he has the choice of years to go over to the new method, but once on the new method he must stay on it.
This option should help companies whose capital allowances happen to be diminishing in the relevant years.
If we left the Bill unamended a Clause which is designed to do greater justice to the taxpayer might in that sort of case cause a drop in loss relief and an increase in tax liability, and thereby do injustice rather than justice. I feel sure that the House as a whole will feel we should perfect the Clause in the way suggested in this Amendment.

Amendment agreed to.

Clause 24.—(PROPERTY SITUATE OUT OF
GREAT BRITAIN.)

Mr. Deputy-Speaker (Sir William Anstruther-Gray): With the next Government Amendment it is possible to discuss the two following Amendments in the name of the hon. Member for Torquay (Mr. F. M. Bennett), in page 37, line 40, at the end to insert:
(7) Any property which is situate out of Great Britain and which is by the law of the country in which it is situate immovable property and which passes only by virtue of paragraph (c) of subsection (1) of section two of the Finance Act, 1894, and having been the subject of a gift inter vivos which gift was effected before the first day of April, nineteen hundred and sixty-two, shall be deemed to be property in which the deceased never had an interest and accordingly shall not be aggregated with any other property but shall be an estate by itself for all the purposes of the estate duty.
and in page 37, line 40, at the end to insert:
(7) This section shall not have effect to charge with estate duty any property which is situate out of Great Britain and is by the law of the country in which it is situate immovable property and which passes only by virtue of paragraph (c) of subsection (1) of section two of the Finance Act, 1894, as having been the subject of a gift inter vivos which gift was effected before the tenth day of April, nineteen hundred and sixty-two, or which passes only by virtue of section forty-three of the Finance Act, 1940, as amended by section forty-three of the Finance Act, 1950, by reason of an interest limited to cease on a death having been disposed of or having determined which dispositon or determination was effected before the tenth day of April, nineteen hundred and sixty-two.
and the Amendments in the name of the hon. Member for Crosby (Mr. Graham Page), all of them to page 37, line 40, at the end to insert:
(7) Where an interest in expectancy in any property which includes or comprises immovable property situate out of Great Britain

has before the tenth day of April, nineteen hundred and sixty-two, been bona fide sold or mortgaged for full consideration in money or money's worth and the estate duty payable in respect of that property when the interest falls into possession is greater than would have been payable but for the omission from subsection (2) of section twenty-eight of the Finance Act, 1949, of paragraph (c) thereof, then (a) no other duty on that property shall be payable by the purchaser or mortagee when the interest falls into possession than would have been payable if the said paragraph (c) had not been omitted; and (b) in the case of a mortgage, any excess of the duty actually payable over that payable by the mortgagee under the preceding sub-paragraph shall rank as a charge subsequent to that of the mortgagee.
(7) Where an interest limited to cease on death (within the meaning of section forty-three of the Finance Act, 1940) after becoming an interest in possession has been disposed of or determined whether wholly or partly, then if that disposition or determination took effect prior to the tenth day of April, nineteen hundred and sixty-two no person shall be accountable by virtue only of the provisions of section forty-four of the Finance Act, 1950, for any increase in the amount of estate duty payable on the death by reason of the inclusion in the property in which the interest subsisted or immoveable property situate out of Great Britain.
(7) For the purposes of section twenty-eight of the Finance Act, 1958, there shall be left out of account any settled property which is immoveable property situate outside Great Britain if the purchase of the interest in that property referred to in paragraph (b) of subsection (1) of that section was completed prior to the tenth day of April, nineteen hundred and sixty-two.
(7) Where—

(a) an interest limited to cease on death (within the meaning of section forty-three of the Finance Act, 1940) has been disposed of or determined after becoming an interest in possession;
(b) the disposition or determination aforesaid took effect prior to the tenth day of April, nineteen hundred and sixty-two; and
(c) the property in which the interest subsisted consisted of or included immoveable property situate out of Great Britain,

then such immoveable property shall not by virtue of the said section forty-three be deemed to be included in the property passing on the death.
(7) Where immoveable property situate out of Great Britain was the subject of or comprised in a gift inter vivos taking effect prior to the tenth day of April, nineteen hundred and sixty-two, then notwithstanding the preceding provisions of this section that property shall not be deemed by virtue of subsection (1) of section two of the Finance Act, 1894, to have passed on the death of the donor nor shall the provisions of section thirty-eight of the Finance Act, 1957, have effect in relation to the gift so far as it consists of that property.

1.45 a.m.

The Attorney-General: I beg to move, in page 36, line 27, to leave out "the following subsections" and to insert:
subsections (2) to (5) below:
Provided that—

(a) the property passing on the death of a person so dying shall not by virtue of a disposition or event occurring before the tenth day of April, nineteen hundred and sixty-two, being a relevant disposition or event within the meaning of section sixty-four of the Finance Act, 1960 (which relates to gifts inter vivos, etc.), be deemed to include any property—

(i) which would not be deemed by virtue of that disposition or event to pass on the death if subsection (2) of the said section twenty-eight then had effect as originally enacted; and
(ii) which is, or directly or indirectly represents, property that would not have been so deemed to pass if the death had occurred on the said tenth day of April;

(b) where an interest in expectancy in any property was before the said tenth day of April bona fide sold or mortgaged for full consideration in money or money's worth, then—

(i) no other duty on that property shall be payable by the purchaser or mortgagee when the interest falls into possession than would be payable if subsection (2) of the said section twenty-eight then had effect as originally enacted; and
(ii) in the case of a mortgage any higher duty payable by the mortgagor shall rank as a charge subsequent to that of the mortgagee.

Subsection (1) of section fifty-six of the Finance Act, 1940 (which relates to transactions with companies under the control of not more than five persons), shall apply for the purposes of paragraph (b) above as it applies for the purposes of section three of the Finance Act, 1894.
This all seems to be a rather formidable menu for this hour of the morning, but I hope that it will not be anything like as formidable as it sounds, because I believe this Amendment covers all the points raised in the others, and, I hope, to the satisfaction of those who have put their names to them. I will deal with it as shortly as possible.
I indicated in Committee that we contemplated tabling Amendments to exempt from duty gifts of immovables made within five years preceding the death because that would be in line with a number of precedents with which I will not weary the House. The donee, if the death occurred within five years after the date of the Budget, would be liable for Estate Duty when

he was not liable for Estate Duty at the time of the gift and he might have disposed of the gift before the liability for Estate Duty ever arose.
Paragraph (a) of the proviso deals with gifts inter vivosand covers settlements. There is a possibility of hardship. In the case of settlements which are terminated it is possible under existing law to get a certificate from the Estate Duty Office as to the prospective Estate Duty liability, and those who applied for such a certificate before the Budget would have been told that there was no prospective Estate Duty liability on this account and, therefore, it would be unfair if such a liability were now imposed in those cases.
I hope that I have said enough to satisfy the House that the proposals in paragraph (a) of the proviso carry out what I indicated in Committee it was our intention to do and to satisfy my hon. Friends that the proposals follow precedents and give adequate protection.
Paragraph (b) deals with different topics, to which I also referred. It gives relief from the new charge to persons who before Budget Day were the purchasers or mortgagees of interests in expectancy in settlements of foreign immovables. Although it has not invariably been observed, there is a tradition that Estate Duty should not be imposed or increased to the detriment of purchasers or mortgagees of reversionary interests.
When Estate Duty was first imposed in 1894, existing purchasers and mortgagees were protected from the new charge, and whenever since then the rates of duty have been inceased, the relevant legislation has provided that any duty payable by a purchaser or mortgagee of a reversionary interest when the interest falls into possession shall be calculated according to the scale of rates in force when the purchase or mortgage was made.
Similar protection has sometimes, but not always, been given to purchasers and mortgagees when the charge to Estate Duty has been extended to property which was previously exempt. Purchasers and mortgagees could therefore justifiably say that they would have expected to be protected from any such new charge as is imposed by Clause 24.


In the absence of any protection against changes in the law a purchase would become sheer speculation and it is likely that reversionary interests would be virtually unsaleable. Similarly, the mortgagee can work only on the basis of the existing law, and in the absence of any protection against changes in the law it would probably be very difficult to obtain loans on mortgage.
I hope that I have said enough to make the provision clear. The last five lines of the Amendment beginning
Subsection (I) of section fifty-six
are aimed at an avoidance trick by which a man might sell a reversion, in effect, to himself through the medium of a one-man company. The wording follows that of a previous Amendment and seeks to stop that avoidance trick.

Mr. F. M. Bennett: As my right hon. and learned Friend suggests, the Amendment amply meets the point of view expressed by a number of my hon. Friends and myself in Committee. I can go further in complimenting my right hon. and learned Friend and saying that his Amendment is better than those which we sought to draft and more amply covers our point of view.
On the last occasion that this matter was discussed, rather harsh words were said from the benches opposite about the length of time which some of my hon. Friends and I took in debating this issue, on the basis that it was a very small group of people that we sought to relieve. I do not think that that was a valid point, whether it was a small group or not, and I am glad that on this occasion Her Majesty's Government have accepted that there is a clear case for justice to be done in not allowing something to apply retrospectively when it ought not to do so. If it were necessary under the procedure to withdraw our Amendments, I can assure my right hon. and learned Friend that we would do so.

Mr. Callaghan: The hon. Member has misunderstood the point. He is never here except when a Clause of this kind is discussed. We were not complaining of the small groups being discussed or of the length of time spent on them. The complaint was that hon. Members opposite were not in Committee then and were not here today when we were discussing problems affecting

millions of people on which there have been a number of Amendments. The complaint was of the long time taken by hon. Members opposite in purely peddling a small matter in which they were personally interested, as they themselves confessed, without bothering to come here to discuss other subjects. There is no complaint tonight because it has all been dealt with very quickly.

Mr. Graham Page: My right hon. and learned Friend the Attorney-General said that his Amendment covered all the other Amendments mentioned by the Chair. As far as those in my name are concerned, paragraph (a) certainly covers my Amendment to insert a new subsection (7) and paragraph (b) covers my Amendment to insert another subsection (7). There are also two other Amendments, which are alternatives, and a further one, proposing a new subsection (7) stands on its own. I have not been able to follow how the Government Amendment covers my other throe Amendments. If my right hon. and learned Friend can assure me straight away that it does, I will not argue the matter further.

The Attorney-General: I think I can, because I have received an assurance that all my hon. Friend's Amendments are covered by the Government Amendment.

Mr. Jay: Am I right in supposing that reliefs under both paragraph (a) and paragraph (b) are not permanent but are self-liquidating in the sense that they have to be related to dispositions or events occurring before 10th April, 1962?

The Attorney-General: They are related to a sequence of events which fall on either side of Budget day. I should like to add that my hon. Friend the Member for Torquay (Mr. F. M. Bennett) has asked me to say that he has no personal interest in this matter.

Mr. Mitchison: As I understand the position, it is that if there were a gift inter vivosbefore the Budget day which, had the property been in this country, would have attracted Estate Duty in the event of a death within the prescribed period, and if that gift was of land which at the time was not subject to Estate Duty but is made subject to it by this


Clause then, in order to avoid retrospective legislation, this Amendment is made to exempt that land. We share the objection of hon. and right hon. Members opposite to retrospective legislation. We think that there are cases in which retrospective legislation ought to be allowed, notably in the case where a warning has been given, and, of course, there was no warning in this case.
We do not particularly like the class of case covered by this Clause. There were scandals about this sort of thing. We had them developed by hon. and right hon. Members speaking for the Government, but, on balance, this does not seem to be a case where one could ask for retrospective legislation to be maintained as it was originally in the Bill.

Amendment agreed to.

Clause 28.—(COMPULSORY REDEMPTION
OF TITHE ANNUITIES.)

Sir Charles Mott-Radclyffe: I beg to move, in page 40, line 33, to leave out the whole or a".

Mr. Deputy-Speaker: With this Amendment can be discussed the Amendment in line 36, to leave out "the land or".

Sir C. Mott-Radclyffe: The purpose of this Amendment is to limit the compulsory redemption of tithe to the case where only part of an agricultural holding is sold, on the grounds that if the purchaser intended to farm the whole holding as a unit in exactly the same way as before, cases might arise where the compulsory repayment of tithe could cause hardship and even make it difficult for a small farmer to find the necessary capital to farm the farm.
I do not propose, at this late hour, to go into the long and tangled story of the violent controversy which arose before the 1936 Tithe Act. If I did so, I should probably be out of order, but it is very dangerous to talk about averages when dealing with tithe rent charges. It might be quite true that on the average tithe rent charge is not very high. It may be true in East Anglia, where it is probably higher than anywhere else, the average is about 6s. to 9s. an acre, but there are certain anomalies which arise and certain extreme cases which could arise and which I think should be dealt with in this Clause.
I know one example of a small farm of 40 acres on which the tithe rent charge is£53 a year. That is an annual tithe rent charge of over £1 an acre. The farm is on bad land and, if it were sold in the open market, I should be surprised if it fetched more than £2,000. For the purchaser to redeem the tithe as he would have to under this Clause he would have to find in addition to the £2,000 a sum of over £700 for compulsory redemption of tithe. That is an absurd anomaly. I cannot believe that the Chancellor intended that kind of situation to arise when this Clause was drawn.
There is provision in the 1936 Act which deals with hardship. I want to make quite certain that that provision has not been repealed or amended in any way by this Bill. As far as I am aware, the provision in the 1936 Tithe Act laid down that where a payment could cause hardship the Board of Inland Revenue or the Tithe Redemption Commission could revoke a redemption notice or could agree to payments being made over an extended period in order to alleviate hardship.
But there is an important proviso that representations must be made before the date specified in the redemption notice. In other words, a prospective purchaser of a farm where the tithe was high would, before he made a bid for it, have to put his case that the redemption of tithes would cause hardship to the Board of Inland Revenue or the Tithe Redemption Commission. Technically, he would be making his case on grounds of hardship in hypothetical circumstances because the farm would not yet be his. Indeed, according to the reply he received from the Board as to whether the plea was accepted or not, he might well alter his decision about purchase.
2.0 a.m.
This is a ridiculous anomaly, and I am sure that my right hon. Friend does not mean that such a circumstance should arise. I ask him to give me an assurance that the old provisions of the 1936 Act to deal with hardship have not been repealed, and, as regards this Clause, that it would not be necessary for a prospective purchaser who thought that the tithe was too high to have to prove his case, so to speak, before he bought the farm.
My right hon. Friend will know that, as the law now stands, tithe redemption annuities are set against Schedule A so that, if there is compulsory redemption of tithes in respect of the sale of any agricultural holding, the net Schedule A liability will be by that amount increased. I hope that my right hon. Friend will be able to throw same light upon what are the intentions behind the new provisions in the Finance Bill.
My hon. Friend the Member for Gloucestershire, South (Mr. Corfield) and I put down these Amendments as exploratory Amendments, and I should be very grateful to have my questions answered.

Mr. Brooke: I understand the main point which my hon. Friend the Member for Windsor (Sir C. Mott-Radclyffe) makes. Although 1 am sure that his Amendment is not the right way to deal with it, I hope to be able to give him an assurance which will set his mind at rest.
I say as background, and in answer to his last remarks, that the object of the Clause is to extend the present compulsory redemption provisions which apply only to amounts of tithe rent charge not exceeding £3 a year. The reason why it is desirable, if it can be done without hardship, to speed up the redemption process is that the cost of collection of tithe rent charge is extremely heavy.
Thanks to the redemption which has been going on for several years, the number of staff employed in the collection has been reduced from 600 to about 200; but, if redemption were to come virtually to an end now that we have fairly well cleared up the cases under £3 a year, this would mean that staff would have to be retained and this very heavy cost of collection would have to continue.
That is why my right hon. and learned Friend looked round to see whether there was some way whereby, without hardship, the process of redemption might be expedited. It seemed to him that it was not unreasonable to provide for compulsory redemption when land was changing hands by sale.
I will certainly give my hon. Friend the assurance that the provisions about hardship in the 1936 Act are still on

the Statute book. They are in no way affected by the Clause. The tithe redemption office of the Board of Inland Revenue widely uses those provisions under the existing compulsory redemption arrangement. I can promise him that they will continue to be administered in a liberal spirit.
My hon. Friend is concerned about those cases where land bears tithe rent charge at an abnormally high rate. I grant his point at once that one can fall into error if one argues simply about the average charge without taking into account the exceptional cases. I think that my hon. Friend is concerned lest, where land bears charge at an abnormally high rate and is offered for sale, the prospect of being compelled to find a substantial lump sum if one bought the land or the farm deterred a would-be purchaser from bidding at all, unless he knew in advance that he had good hope of the tithe redemption office being willing to apply the hardship provisions in the 1936 Act.
If a sale of land includes land which bears tithe rent charge at an abnormally high rate, I am happy to give the House a general assurance that the tithe redemption office of the Board of Inland Revenue will take this into account in judging whether redemption should be enforced or whether it is an appropriate case for applying the proviso to Section 15 (3) of the 1936 Act, which is the hardship proviso. If the amount of the redemption money, the lump sum, is very small, there is not likely to be any case for postponement. I think that my hon. Friend will accept that. If the sale includes land which bears tithe at an abnormally high rate and if the lump sum will be a considerable one for the purchaser, I make the promise that special consideration will be given and these words of mine will be on record and can be referred to if need be. I hope that that will set my hon. Friend's main anxiety at rest.

Mr. Mitchison: Before we go any further will the right hon. Gentleman enlighten me on one point? He spoke with feeling about the cost of collecting tithe redemption annuities. Can he tell me whether the cost exceeds or does not exceed the proceeds?

Mr. Brooke: I can certainly tell the hon. and learned Gentleman that the


cost is about 16 per cent. of the proceeds, whereas the general cost of collection by the Inland Revenue over its functions as a whole represents only about 1½ per cent. of the amount collected. As I explained, the total staff was over 600. It has now fallen to about 220. If it were possible to speed up the process of redemption it might be possible to reduce this very high percentage cost.

Sir C. Mott-Radclyffe: In view of the assurance given by my right hon. Friend, for which I am grateful, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 29.—(SHORT TITLE,
CONSTRUCTION, EXTENT AND REPEAL.)

Amendment made:In page 41. line 20. at end insert:

(6) This Act, in so far as it relates to the Government Annuities Act, 1929, shall extend to the Channel Islands and the Isle of Man, and the Royal Courts of the Channel Islands shall register it accordingly.—[Mr. Barber.]

Fifth Schedule.—(SUGAR, INVERT SUGAR,
ETC. (MISCELLANEOUS PROVISIONS).)

Mr. John Farr: I beg to move, in page 48, line 34, to leave out "sections" and to insert "section".

Mr. Deputy-Speaker: The next Amendment, in page 48, line 34, leave out "and two hundred and seventeen" may be debated with this one.

Mr. Farr: Thank you, Mr. Deputy-Speaker.
The two Amendments, about which I shall speak briefly in view of the lateness of the hour, refer to Section 217 of the Customs and Excise Act, 1952, which, in its condensed form, relates to the relief or allowance of duty on sugar, etc., for use in art or manufacture.
Since the Finance Bill was introduced some months ago, one or two rather large, unexpected and certainly undeserving victims of this measure which was included in the Bill have come to light. My hon. and gallant Friend the Member for Down, South (Captain Orr) has a particular victim in pagura, which is an agricultural product. The pharmaceutical industry and the chemistry industry are one of the principal users of duty-free sugar under Section 217 of the Customs and Excise Act, 1952.

Sugar is used by the pharmaceutical industry for the manufacture of goods both for the home and export markets, and I should like my hon. Friend the Financial Secretary, when he replies to tell me, or, possibly, to confirm, that such exports by the pharmaceutical industry will be granted relief under Section 218 of the 1952 Act.
Possibly, however, one of the most important victims of the provisions relating to Section 217 of the Act are some large foundries which use sugar when preparing their bonding materials to make the moulds. One foundry uses about 200 tons of sugar a year. It has export agents in Spain, the United States of America and Italy. It has just exhibited at the May, 1962, Fair in Detroit. It now finds that the cost of the sugar which it uses in preparing the sand cores and moulds which it exports has gone up by over 100 per cent. For example, the cost of sugar used previously was about 30s. 6d. per cwt. and the removal of the repayment of surcharge will increase the price of the sugar by 34s. 10d. per cwt. For caster sugar, which is another type of sugar used in the bonding process, the previous price was 41s. 10d. per cwt. but the new price is 70s. 9d. per cwt.
I should like to know whether my right hon. and learned Friend the Chancellor of the Exchequer really meant that firms playing such an important part in our industry should meet the full effects of Section 217 and whether their exports will qualify for relief under Section 218 of the 1952 Act.

Sir E. Boyle: These Amendments, which have been lucidly explained by my hon. Friend the Member for Harborough (Mr. Farr) would have the effect of restoring to the position as it was before the Budget the exemption from sugar surcharge provided by Section 217 of the Customs and Excise Act, 1952, in respect of sugar used in
any art or manufacture, other than the production of food or drink for human consumption".
2.15 a.m.
The point is that the sugar surcharge is not a tax but an addition to the price of sugar on the internal market of the United Kingdom, and if certain users are to be allowed to buy sugar without paying surcharge, the result can only be


that other users will have to pay a higher surcharge. Until the provisions in this Budget, the domestic and other consumers of sugar as food were, in effect, subsidising the industrial users.
I do not think that there is justification for this subsidy, of over £500,000 a year, paid by the food users to the industrial users of sugar. That is why my right hon. and learned Friend, after considering the matter carefully, has decided that it would not be right to make the Amendments put forward by my hon. Friend. However, I can assure my hon. Friend on the export aspect, that provision exists for the repayment of the surcharge on the amount of sugar shown to have been used in the manufacture of exported goods. This applies even though the sugar is no longer present as sugar in exported goods, as in the case of lactic acid, but it does not apply where sugar is not actually used in the manufacture of exported goods, as in the case of metal castings. That is a fair distinction.
We have looked at this matter again, but it would not be right to alter the provisions in the Budget. We would simply have the situation in which the domestic consumer was subsidising the industrial user. Although I understand the problems raised by my hon. Friend, on balance it would be right to leave the Clause as we left it at earlier stages.

Mr. Farr: I am not satisfied with the reply, but, in the hope that perhaps on another occasion I may be able to raise this matter again with my hon. Friend, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Eighth Schedule,—(PURCHASE TAX
(AMENDMENTS OF LIST OF CHARGEABLE GOODS).)

Mr. John Eden: I beg to move, in page 51, line 27, at end to insert:
(4) Any article made up in the premises of a hotel or restaurant and served as part of a meal in such premises.

Mr. Deputy-Speaker (Sir Robert Grimston): The House may discuss, at the same time, the other Amendment in the name of the hon. Gentleman, in page 51, line 48, at the end to insert:

Any product made up in the premises of a hotel or restaurant and served as part of a meal in such premises.

Mr. Eden: The purpose of the Amendment is twofold—,to try to get some clarification and some simplification in the application of this new Purchase Tax requirement. Possibly it would be simplest were I to refer to Notice No. 78C, published by H. M. Customs and Excise, referring to the Budget Statement imposing Purchase Tax on confectionery, beverages and ice cream.
The first Amendment deals with Group 34, which covers items of confectionery. Any hon. Member who has studied the list, which is in two columns, one specifying those items which are chargeable at 15 per cent. and the other specifying the items which are not chargeable, will have noticed that it is extremely complicated and that it is difficult for the average person—and in this context I am well below average—to determine exactly what is to come within the scope of the new tax. For example, there is an item in this Notice which refers to "Collections of petit fours sold as such", which are thereby exempt. I am asking my hon. Friend to tell me whether petit fours served as part of a meal in an hotel or restaurant are exempt from Purchase Tax.
The more important Amendment is that in page 51, line 48. This deals with ice cream. Ice cream and water ices are not just simple commodities, as one might be led to expect. Consider water ice. It is made by a very delicate process and is sometimes flavoured with fresh fruit juice. This fresh fruit juice is liable to Purchase Tax. Water ice can also be made with fruit purse, which is exempt from tax, yet water ice itself is specified as being chargeable at 15 per cent. tax.
But more important even than water ice is ice cream itself. As I am sure hon. Members know, in high-class establishments ice cream is not made up of ready-made mixes or of ice cream powders, all of which are within the scope of this tax, but is made from fresh ingredients such as fresh cream, pure sugar, and fresh eggs. If ice cream is made up in that way and is sold on the premises as part of a meal, is it to be subject to 15 per cent. tax?
This is further complicated by the reference, in the examples in Group 36 to which I have referred, to frozen cakes not being chargeable, yet articles consisting of fruit, nuts, cake, and so on, covered with ice cream, are chargeable. It is extremely difficult for the layman, and indeed for the expert caterer, to differentiate between these two. For example, ice cream used in frozen cakes frequently includes nuts and cherries. I admit that this is a small item, but is this to be included in the tax, or exempted from it?
Again, ice cream is used in various forms. It is served as a frozen dessert as part of a meal, but frozen desserts are listed as exempt, yet ice cream used in other articles is apparently chargeable. How is a soufflé surpriseto be charged and listed? A soufflé surpriseis something very special indeed. It is a hot souffle with a special ice cream inside it. Is this to be chargeable, or exempt?
I give those examples to the House so that hon. Members can see that this is a complicated matter. It will become even more complicated if we place this considerable burden on the administrative staff of catering establishments. Consider a hotel which employs anything from 45 to 120 cooks. Who is to be responsible for seeing what articles go into (these made-up dishes, part of which consist of ice cream? These cooks work under extremely great pressure, at tremendous speed, and we are asking that someone should supervise what they are using, noting each small item of ingredient and seeing whether there is an ice cream covering with fruit and nuts—and whether it shall be charged and listed—or whether it is part of a frozen cake and is not a covering—and shall be exempt.
I hope that the Financial Secretary will take the opportunity to clarify this point and to give some relief on the administrative side to what is already an over-pressed industry. He may say that all these requirements apply only to those establishments which produce these chargeable goods in excess of £500 a year. If so, could he give some clarification of paragraph 3 of Notice No. 78c by the Commissioners of Customs and Excise? That paragraph contains the sentence:

Every manufacturer of goods becoming chargeable with tax must be registered with the Customs and Excise unless he can satisfy the Department that his sales of all goods chargeable with tax do not, on the average exceed £500 a year.
Do the words "sales of all goods chargeable" apply to all the goods, be they confectionery, beverages or ice cream, or do they apply separately in each group? If they do, then this is an even smaller point than I thought it was at the beginning. But if they do not, there is a real case to be answered. I know that a number of people, including those in the most important establishments in the hotel and catering industry, view this requirement with great dismay because it will add a heavy administrative burden. They beg for some relief from this burden.

Sir E. Boyle: I am not going to pretend that there will be no administrative difficulties in hotels arising out of this proposal. Listening to my hon. Friend the Member for Bournemouth, West (Mr. Eden) I could not help being reminded of that phrase:
The lady doth protest too much, methinks.
However, I do not think that it will be quite as difficult as my hon. Friend suggests.
The first Amendment—the impact of the new statutory tax on chocolates, sweets and confectionery—is, I agree, the easier of the two Amendments with which to deal. The effect of the Government's proposals is that things like meringues, pastries, eclairs and similar articles of confectionery likely to be made by a hotel chef will come outside the scope of the tax. The charge does not extend to bakers' and pastrycooks' confectionery. That is not the same thing as chocolate couverture.
I agree that ice cream is slightly more difficult, but I can state this doctrine to the House. The Customs does not regard the charge on ice cream and similar frozen products as extending to sundaes and other articles made up with an ice cream base. I think that that would apply to an omelette soufflé surprise.The taxable article in such compositions is simply the ice cream; and ice cream itself is the only important taxable article which hotel and restaurant kitchens are likely to be producing. The great majority of hotels and restaurants


buy their ice cream ready made, at a tax inclusive price.
Listening to the remarks of the hon. Member for Bournemouth, West I thought that he must be living in an optimistic world. He spoke of gallons of fresh cream, fresh eggs and similar articles used in these commodities. That may be the practice of hotels in Bournemouth, but it is certainly not my experience of the universal activities of restaurants and hotels. The great majority surely buy their ice cream ready-made.

Mr. Eden: I emphasised that I was referring to high-class establishments.

2.30 a.m.

Sir E. Boyle: I realise that, of course. I was trying to produce a realistic assessment of how the Clause will work out in practice from the point of view of the general run of hotels.
For those who buy their ice cream ready-made at a tax-inclusive price no further liability to tax will arise. The same cannot be the case where they make their own ice cream if they do so from what are called complete ice cream mixes or dairy ice cream mixes which are being valued for tax purposes as though they were finished ice cream. I am not an expert on finished ice cream or dairy ice cream, and do not feel any the worse for that. The important point is that it is only the hotel or restaurant which makes its own ice cream from the separate ingredients, or from what is known in the trade as an incomplete mix, and has sales of ice cream which exceed £500 a year that will become liable to registration and payment of tax.
I appreciate that there will be difficulty. My hon. Friend is on a fair point about supervision when it comes to registration. I recognise that in some cases there will be a certain amount of discussion with the Customs and Excise about this. But surely a registered hotel or restaurant, like any other registered trader, will have to keep adequate records, for example, of the total gallonage of ice cream that it produces when it produces its own ice cream from the separate ingredients. There is no reason why this should be too difficult a requirement. The bases of valuation are available, and they will

apply whether in a particular case the ice cream is for sale to the public, or whether it goes to some rather more elaborate kind of concoction such as that to which my hon. Friend referred.
My hon. Friend's Amendment would produce a rather difficult problem of its own. There will be, as I admit, some administrative problems arising out of the Bill. None the less, I think that the Amendment would produce difficult problems of its own which are very well illustrated by an actual case which has arisen since the Finance Bill was published. This concerns a restaurant occupying premises which are large enough to be available for dances, receptions and similar functions. The proprietors of the restaurant also own a tea room and a cake shop. They make their own ice cream mainly for service with restaurant meals but they also supply it when required for catering at dances and they sell a certain amount through the tea room and cake shop and provide a nearby hotel with supplies for its dining room.
If the House accepted the Amendment, the latter supplies would be tax free. Supplies in the cake shop would be taxable. But it is a rather nice point whether a banana split and a cup of tea in a tea room can be said to constitute a meal in a restaurant or not. The supplies for dancing and receptions would raise rather difficult borderline issues.

Mr. Jay: Is not all this nonsense a conclusive reason against having the tax at all?

Sir E. Boyle: On the contrary, it is a conclusive reason for something quite different. The arguments I have advanced are conclusive reasons for not exempting a class of goods simply because of their use in a particular case. That is always a difficult thing in Purchase Tax, anyway. This is a conclusive argument against the proposals in the Amendment.
While I entirely understand my hon. Friend's anxieties, I could not advise the House to accept the Amendment. I know that, in practice, it is the wish of everyone in the Customs and Excise and everyone else that there shall be as few administrative difficulties as possible. However, the House having


decided to embark on this extension of our indirect tax system, I do not think it would be practicable to make the sort of Amendment which my hon. Friend has proposed.

Mr. Mitchison: The reasons given are as clear as mud even though they relate only to the ice cream. All I can say is that if one wanted any reassurance that this absurd tax designed to save the country in a financial crisis was utterly absurd, and the more so because it is the Government's last resort, we have had it in the two speeches to which we have just listened.

Mr. Eden: In asking leave to withdraw the Amendment I have moved, I feel a little more hesitation about the second one. I hope that in the application of this requirement some instruction will go from the Treasury to the Customs and Excise to operate it with extreme caution and care so as not to over-burden the administrative arrangements of the larger hotels and catering establishments.
With that assurance which I am sure my hon. Friend will give, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Ninth Schedule. — (MISCELLANEOUS RULES APPLICABLE TO CASE VII OF SCHEDULE D.)

Mr. Barber: I beg to move, in page 64, line 20, to leave out from "in" to "which" in line 21 and to insert:
respect of maintenance expenditure incurred by any person—

(a) in computing the gain accruing to that person from the acquisition and disposal either—

(i) for the purposes of the profits tax (if any) chargeable on the disposal; or
(ii) for the purposes of sub-paragraph (3) of paragraph 7 of this Schedule; or

(b) in computing for any purpose of this Schedule the amount which would secure that on that person's disposal of the land neither a gain nor a loss accrued to him;


and maintenance expenditure incurred by the person chargeable which falls to be taken into account for other purposes of Case VII shall not be taken into account under section one hundred and one or paragraph (g) of subsection (1) of section one hundred and seventy-six of the Income Tax Act, 1952 but where it has been taken into account under either of those enactments, any necessary adjustment of that person's liability to tax may be made

by means of an additional assessment or otherwise and for that purpose the amount of any tax repaid by reason of its having been taken into account may be charged on him under Case VI of Schedule D and recovered accordingly.
In this sub-paragraph references to maintenance expenditure incurred by any person are references to any expenditure so incurred".
This Amendment arises out of a point which was brought to our attention by my hon. Friend the Member for Crosby (Mr. Graham Page) when we considered the Ninth Schedule in Committee. This Amendment fulfils an undertaking which I then gave to the Committee. It provides for the deduction, in computing a gain on disposal of land chargeable under Case VII, of expenditure which can be taken into account in a claim for relief from tax under Schedule A in respect of maintenance and so on of the property, and as a corollary, for the exclusion of such expenditure from a maintenance claim and withdrawal of any maintenance relief already given in respect of it. The rule runs only for Income Tax and not Profits Tax. It does not run in relation to Income Tax for certain special cases.
I think that I can best explain what it is intended to do in the following way. As it stands paragraph 15 (3) of the Ninth Schedule to the Bill, which it is sought to amend, denies the deduction, in computing a gain chargeable under Case VII on acquisition and disposal of land, of any expenditure incurred on the property which could—and this is the operative word—be taken into account in a maintenance claim.
When this matter was discussed in Committee my hon. Friend the Member for Crosby moved an Amendment which was designed to permit the deduction of such expenditure for which a Case VII taxpayer had not, in fact, had maintenance relief, and in replying to my hon. Friend I pointed out that the rule in the Bill might be too harsh but that the Amendment could have the result that the tax relief would be given twice over for the same expenditure, and this, of course, was something which neither my hon. Friend nor I wished to see happen.
I explained how it would happen under the Amendment that double relief might be given, because on the sale of a house, for example, the vendor might obtain relief on relevant expenditure


against his Case VII liability and the purchaser might nevertheless bring it into the maintenance claim. But I agreed that the rule in the Bill might be too harsh, first, because, though the purchaser might be relieved of the seller's expenditure, the rule would charge the seller on more than his actual profit, and, secondly, because, as was pointed out by my hon. Friend, the maintenance relief could only be given up to the amount of the Schedule A assessment or the Schedule A assessment plus an excess rents assessment under Schedule D, and in the course of a short-term transaction buying and selling the taxpayer might spend more than this amount on repairs.
The effect of the Amendment is to confine the denial of a Case VII deduction for maintenance expenditure to the computation of a gain for the purpose of Profits Tax and to certain special cases for Income Tax as well as Profits Tax. In the ordinary way this leaves the general rule of the Bill to operate whereby a gain for the purpose of Case VII is to be computed as if the acquisition and disposal of the asset in question had been an adventure in the nature of trade.
I am sure that the House agrees that this is a reasonable Amendment and is grateful to my hon. Friend for having drawn attention to the point. I commend the Amendment to the Committee.

Mr. Graham Page: I am grateful to my hon. Friend not only for tabling the Amendment, but for his explanation of it. When it was put on the Notice Paper I studied it. My usual practice, in order to understand an Amendment of this sort, is to purge the paragraph of parentheses, to read the first few words with the last few words and to hope that they mean what the Clause means. I was quite unable to do that in this case. I am a very trustful sort of fellow, and I will trust my hon. Friend's explanation. Certainly, the explanation which he gave is exactly what I wanted, and, therefore, I hope that the Clause does what he explained that it does.

Mr. Callaghan: Another possibility which I have found useful on occasions is to insert "not" and to see whether it makes any more sense.

Amendment agreed to.

The Attorney-General: I beg to move, in page 66, line 2, to leave out "of twelve months following the gift" and to insert:
ending with the year of assessment following that in which the gift is made".
It would be convenient to discuss at the same time the following Amendment.
Both Amendments do the same thing —alter the period within which an election can be made from the twelvemonth period, following a gift in the one case and in relation to assets appropriated to stock in trade in the other case, to the period
ending with the year of assessment following that in which the gift
or stock in trade is dealt with. The reason is that the time limit was meant to give the taxpayers concerned reasonable time to decide what they wanted to do when dealing with the settlement of Case VII liabilities, but in fact, the periods are too short, and the most convenient time from both the Revenue point of view and the taxpayer's point of view is for the election to accompany the Income Tax return covering the period in which the relevant event has happened.
The return will normally be made early in the year of assessment following the event, and this can be more than 12 months after the event if it takes place early in the Income Tax year. For instance, in the ease of a gift on 10th April, 1963, the relevant return in the ordinary course of events would be made a month or so after 10th April, 1964.
2.45 a.m.
The Amendment accordingly extends the time limit for those two types of election to the period ending with the year of assessment following that in which the relevant event happened. The first Amendment deals with the election relating to gifts and the second relates to assets appropriated to stock in trade.

Amendment agreed to.

Further Amendment made:In page 66, line 8, leave out "of twelve months following" and insert:
ending with the year of assessment following that in which is made".—[The Attorney-General.]

Eleventh Schedule.․(REPEALS.)

The Attorney-General: I beg to move, in page 71, line 8, column 3, to leave out "Section fifteen".
This Amendment is to correct a mistake in the Appeals Schedule. It repeals Section 15 of the Finance Act, 1959. This is not intended and not wanted.

Amendment agreed to.

PART VI


Government annuity repeals


Session and Chapter
Short Title
Extent of Repeal


15 &amp; 16 Geo. 5. c. 20.
The Law of Property Act, 1925.
In section one hundred and ninety-one, subsection (1) from the words "Where the rent" onwards, and in subsection (4) the words "or the Government annuity".


19 &amp; 20 Geo 5. c 27.
The Savings Banks Act, 1926.
The whole Act, so far as unrepealed


19 &amp; 20 Geo. 5. c. 29.
The Government Annuities Act, 1929.
Sections one to seven. In section eight, in subsection (1), the words "and all annuities for years, whether immediate or deferred".




In section nine, subsection (2) and the proviso to sub-section (3).




Section twelve.




In section thirteen, subsection (2) and in subsection (3). the words "or the Bank of England".




Sections fourteen and sixteen to eighteen.




In section twenty-two, in subsection (1), paragraphs (a) to (c) and in paragraph (d) the words "or the books of the Bank of England".




In section twenty-three, in subsection (3), the words "purchase or".




Section twenty-eight.




Section thirty, as respects accounts for any period after 5th January, 1963.




In section thirty-two, subsection (1).




In section thirty-three, paragraph (f), in paragraph (g) the words "in the books of the Bank of England or "and in paragraph (i) the words" of any stock or annuities or".




Sections thirty-seven to forty.




In section forty-two, subsection (2) and the proviso to subsection (3).




Section fifty-three.




In section fifty-four, in subsection (1), the words "annuities and", subsection (2), in subsection (3) the words "for deferred savings bank annuities and" and the words "and invested in manner provided by this Act," and in subsection (4) the words "annuities and," where first occurring, and the words from "and defrayed" onwards.




In section fifty-eight, paragraph (b) and in paragraph (c) the words "annuity or".




In section sixty-three, in paragraph (h), the words "or any annuity for years".




Section sixty-five, as respects accounts for any period after 5th January, 1963.




In section sixty-seven, subsection (1) from the beginning to the word "same", except the words "All moneys which form part of the Government Annuities Investment Fund", subsections (2) and (3), and in subsection (4) the words "stock and annuities" and paragraph (f) from "distinguishing" onwards.




The First Schedule.

Further Amendments made:In page 73, line 24, column 3, at end insert:
except as respects claims made on the basis that section seventeen of this Act shall not apply".—[Mr. Brooke.]

In page 74, line 15, at end insert:
and the repeal of paragraph (c) of subsection (2) of section twenty-eight of the Finance Act, 1949, shall have effect subject to the savings contained in the proviso to subsection (1) of section twenty-four of this Act".—[The Attorney-General.]

In page 74, line 34, at end add:

Session and Chapter
Short Title
Extent of Repeal


23&amp; 24 Geo.5.c.19
The Finance Act, 1933.
Section forty-five.


1 Edw 8.&amp; 1 Geo. 6. c. 54.
The Finance Act, 1937.
Section thirty-three.


2 &amp; 3 Geo 6.c.117.
The National Loans Act,1939.
In the Second Schedule, in paragraph 5, sub-paragraph (c) and the words from "and such securities" on-Words.


11&amp; 12 Geo.6.c.39.
The Industrial Assurance and Friendly Societies Act, 1948.
In section six, subsection (3).


2 &amp; 3 Eliz.2.c.44.
The Finance Act, 1954.
In the Fifth Schedule, paragraph 2.


4 &amp; 5 Eliz.2.c.6.
The Miscellaneous Financial Provisions Act, 1955.
In section five, subsection (13).


9 &amp; 10 Eliz.2.c.15.
The Post Office Act, 1961.
In section nineteen, subsection (7) from "and any "onwards.


The above repeals, so far as they relate to the grant of immediate life annuities and matters connected therewith, shall not have effect in relation to any such annuity of which the purchase is completed (within the meaning of the First Schedule to the Government Annuities Act, 1929) on or before the last day of August, nineteen hundred and sixty-two.—[Mr. Barber.]

Bill recommitted to a Committee of the whole House in respect of the Amendment to Schedule 9, page 62, line 15, standing on the Notice Paper in the name of the Chancellor of the Exchequer.—[Sir E. Boyle.]

Bill immediately considered in Committee.

[Sir ROBERT GRIMSTON in the Chair]

Ninth Schedule.—(MISCELLANEOUS RULES APPLICABLE TO CASE VIII OF SCHEDULE D.)

Sir E. Boyle: I beg to move, in page 62, line 15, at the end to insert:
13.—(1) Where under any arrangement between a company and the persons holding shares in or debentures of the company or any class of such shares or debentures, being an arrangement entered into for the purposes of or in connection with a scheme of reconstruction or amalgamation, another company issues shares or debentures to those persons in respect of and in proportion to (or as nearly as may be in proportion to) their holdings of the first-mentioned shares or debentures, but the first-mentioned shares or debentures are either retained by those persons or cancelled, then those persons shall be treated as exchanging the first-mentioned shares or debentures for those held by them in consequence of the arrangement (any shares or debentures retained being for this purpose regarded as if they had been cancelled and replaced by a new issue):
Provided that sub-paragraph (2) of paragraph 12 above shall not apply.
(2) Where any scheme of reconstruction or amalgamation involves the transfer of the whole or part of a company's business to another

company, and the first-mentioned company receives no part of the consideration for the transfer (otherwise than by the other company taking over the whole or part of the liabilities of the business), then the first-mentioned company shall not be chargeable under Case VII by reference to the transfer in respect of its acquisition and disposal of any assets included in the transfer.
(3) In this paragraph "scheme of reconstruction or amalgamation" means a scheme for the reconstruction of any company or companies or the amalgamation of any two or more companies, and references to shares or debentures being retained include their being retained with altered rights or in an altered form, whether as the result of reduction. consolidation, division or otherwise.
It will be remembered that this is the Amendment which we were about to discuss at the earlier recommittal stage last night when the hon. Member for Gloucester (Mr. Diamond) put us all in his debt by discovering a printing error. I am sure that the Committee will be pleased to see the word "shares" twice appearing after the words "first-mentioned" in line 6. I have made inquiries since that time. The text was delivered perfectly correctly to the printers. I think that, strictly speaking, the supervision of the text is a matter for the House authorities, but, quite clearly, we in the Treasury should also have scrutinised the Notice Paper to see that it was correct and I should like once again and finally to apologise that that was not done.
This is a succulent dish to put before hon. Members as a final course on the


Bill. In view of the lateness of the hour I might say that the Amendment looks long, but it adds a new paragraph to the Schedule containing provisions necessary to deal with certain types of schemes for the reconstruction or amalgamation of companies. It arises out of a point raised by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) at an earlier stage of the Bill. But the problem went rather wider than the type of case which my hon. Friend mentioned on that occasion.
I should be perfectly ready to explain in greater detail the provisions of the Amendment. Frankly, it is not easy to do so shortly. I should either make a long speech to the Committee or just move the Amendment, as I do now and then endeavour to answer any questions which hon. Members may wish to put to me.

Mr. Diamond: At all events, I must say how grateful I am to the Financial Secretary for the trouble he has taken and to the officials of the House for the convenience with which they have turned us back into Committee to enable this matter to be discharged. The last thing I would wish to do would be to hold up the Committee, though I do not know whether it would be for the convenience of the Standing Committee which is sitting elsewhere if we carried on with our consideration, because there may be some relationship between the deliberations of that Committee and of this Committee of the whole House.
I am still unable to understand this Amendment, try as hard as I have done. I do not understand, in particular, the words which refer to shares or debentures which are either retained or cancelled. Any Amendment which has the same effect whether it retains or cancels shares does not seem at first sight absolutely pellucidly clear. Although I should hate to detain the Committee at this time, I could not say that I know what it is all about.

Mr. Callaghan: I think the Financial Secretary is bludgeoning us in an intolerable way. He is saying, "Either you take this on trust, or I make a long speech". Why the Committee should be subject to that sort of thing from this Government at this time of night I fail to understand and I resent very much the spirit in which he has approached this matter. Faced with this awful dilemma of listening to a long speech or taking it on trust, I think that, on balance, we had better take it on trust.

Amendment agreed to.

Schedule, as amended, agreed to.

Bill reported, with an Amendment, as amended (on recommittal), considered to be read the Third time this day and to be printed.[Bill 128.]
ADJOURNMENT
Resolved,That this House do now adjourn.—[Mr. Whitelaw]

Adjourned accordingly at eight minutes to Three o'clock, a.m.